AASB 2010-7 - Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) - December 2010
74Paragraphs 14 and 15 are amended to read as follows:
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74 Paragraphs 14 and 15 are amended to read as follows:
14 When an entity ... A financial asset and a financial liability, or a portion of either, are derecognised only when the requirements of paragraphs 3.2.1-3.2.23, 3.3.1-3.3.4, B3.2.1-B3.2.17 and B3.3.1-B3.3.7 of AASB 9 are met.
15 AASB 1023 provides guidance for recognising and measuring financial guarantees and similar instruments that provide for payments to be made if the debtor fails to make payments when due, if that contract transfers significant insurance risk to the issuer. Financial guarantee contracts that provide for payments to be made in response to changes in relation to a variable (sometimes referred to as an ‘underlying’) are subject to AASB 139.1
1 In December 2009 and December 2010 the AASB issued amendments to some of the requirements of AASB 139 and relocated them to AASB 9 Financial Instruments. AASB 9 applies to all items within the scope of AASB 139.
Amendments to AASB 1023 Amendments to AASB 1023
Amendments to AASB 1023
56 In paragraphs 2.3.2, 2.4.4, 15.2, 15.5, 15.5.1 15.5.2 and 16.1, and in paragraphs 17, 18 and 19 of the Appendix, the references to ‘AASB 139’ are replaced with ‘AASB 9’.
57 Paragraphs 2.2(f), 2.3.1, 15.2.1, 15.2.2, 16.1.1 and 19.1 are amended, paragraph 18.4 is deleted and paragraphs 16.1.2, 16.1.3 and 18.5 are added as follows:
2.2 This Standard does not apply to:
(f) financial guarantee contracts unless ... the issuer may elect to apply either AASB 9 Financial Instruments, AASB 132 Financial Instruments: Presentation and AASB 7 Financial Instruments: Disclosures or this Standard to such financial guarantee contracts. ...
(g) ...
2.3.1 AASB 9 Financial Instruments requires hybrid contracts that contain financial asset hosts to be classified and measured in their entirety in accordance with the requirements in paragraphs 4.1.1-4.1.5 of that Standard. However, AASB 139 requires an entity to separate some embedded derivatives from their financial liability hosts contract, measure them at fair value and include changes in their fair value in the statement of comprehensive income. AASB 139 applies to derivatives embedded in a general insurance contract unless the embedded derivative is itself a general insurance contract.
15.2.1 An insurer applies AASB 139 to its financial assets. Under AASB 139 a financial asset is classified and measured at fair value through profit or loss when is a financial asset that meets either of the following conditions:
(a) it does not meet the criteria specified in paragraph 4.1.2 of AASB 9 to be is classified as held for trading at amortised cost; or
(b) it is designated as “at fair value through profit or loss” upon initial recognition in accordance with paragraph 4.1.5 of AASB 9. An entity may use this designation when it is a contract with an embedded derivative and paragraph 11A of AASB 139 allows the entity to measure the contract as “at fair value through profit or loss”; or when doing so results in more relevant information, because either:
Section 74 - AASB 2010-7 - Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) - December 2010 - Paragraphs 14 and 15 are amended to read as follows: | Zoe
(i) it eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as ‘an accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases; or
(ii) a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the entity’s key management personnel (as defined in AASB 124 Related Party Disclosures), for example the entity’s board of directors and chief executive officer.
…
15.2.2 The view adopted in this Standard is that financial assets, within the scope of AASB 139 that back general insurance liabilities, are permitted to be measured at fair value through profit or loss under AASB 139. This is because the measurement of general insurance liabilities under this Standard incorporates current information and measuring the financial assets backing these general insurance liabilities at fair value, eliminates or significantly reduces a potential measurement inconsistency which would arise if the assets were classified as available for sale or and measured at amortised cost.
16.1.1 In relation to non-insurance contracts regulated under the Insurance Act, an insurer applies AASB 139 to its financial assets and financial liabilities. Under AASB 139 a financial asset or financial liability at fair value through profit or loss is a financial asset or financial liability that meets either of the following conditions:
(a) it is classified as held for trading; or
(b) it is designated as “at fair value through profit or loss” upon initial recognition. An entity may use this designation when it is a contract with an embedded derivative and paragraph 11A of AASB 139 allows the entity to measure the contract as “at fair value through profit or loss”; or when doing so results in more relevant information, because either:
(i) it eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as ‘an accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases; or
(ii) a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the entity’s key management personnel (as defined in AASB 124 Related Party Disclosures), for example the entity’s board of directors and chief executive officer.
AASB 1 First-time Adoption of Australian Accounting Standards permits entities to designate financial assets and financial liabilities as “at fair value through profit or loss” on first application of the Standard.
16.1.2 Under AASB 9 a financial asset is classified and measured at fair value through profit or loss when:
(a) it does not meet the criteria specified in paragraph 4.1.2 of AASB 9 to be classified at amortised cost; or
(b) it is designated as “at fair value through profit or loss” upon initial recognition in accordance with paragraph 4.1.5 of AASB 9.
AASB 1 First-time Adoption of Australian Accounting Standards permits entities to designate financial assets as “at fair value through profit or loss” on first application of the Standard.
16.1.3 Under AASB 9 a financial liability at fair value through profit or loss is a financial liability that meets either of the following conditions:
(a) it meets the definition of held for trading; or
(b) it is designated as “at fair value through profit or loss” upon initial recognition in accordance with paragraph 4.2.2, because either:
(i) it eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as ‘an accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases; or
(ii) a group of financial liabilities or financial assets and financial liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the entity’s key management personnel (as defined in AASB 124 Related Party Disclosures), for example the entity’s board of directors and chief executive officer.
An entity may also use this designation when it is a contract with an embedded derivative and paragraph 4.3.3 of AASB 9 allows the entity to measure the hybrid contract as “at fair value through profit or loss”.
AASB 1 First-time Adoption of Australian Accounting Standards permits entities to designate financial liabilities as “at fair value through profit or loss” on first application of the Standard.
18.4 [Deleted by the AASB]
18.5 AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010), issued in December 2010, amended paragraphs 2.2(f), 2.3.1, 2.3.2, 2.4.4, 15.2, 15.2.1, 15.2.2, 15.5, 15.5.1, 15.5.2, 16.1, 16.1.1 and 19.1, and paragraphs 17, 18 and 19 in the Appendix to AASB 1023 and added paragraphs 16.1.2 and 16.1.3. An entity shall apply those amendments when it applies AASB 9 as issued in December 2010.
19.1 In this Standard:
...
deposit component means a contractual component that is not accounted for as a derivative under AASB 9 Financial Instruments and would be within the scope of AASB 9 if it were a separate instrument
...
Amendments to AASB 1038 Amendments to AASB 1038
Amendments to AASB 1038
58 In paragraphs 2.2.2, 10.2, 10.5, 10.5.1, 10.6, 10.6.1, 10.7, 10.7.1, 10.7.2, 12.1, 12.1.1, 12.1.2, 17.5.4 and 17.5.5, and paragraphs 16 and 17 in the Appendix, the references to ‘AASB 139’ are replaced with ‘AASB 9’.
59 Paragraphs 2.2.1, 10.2.1 and 10.2.2 and 20.1 are amended, paragraph 19.4 is deleted and paragraph 19.5 is added as follows:
2.2.1 AASB 9 Financial Instruments requires hybrid contracts that contain financial asset hosts to be classified and measured in their entirety in accordance with the requirements in paragraphs 4.1.1-4.1.5 of that Standard. However, AASB 139 Financial Instruments: Recognition and Measurement requires an entity to separate some embedded derivatives from their financial liability hosts contract, measure them at fair value and include changes in their fair value in the statement of comprehensive income. AASB 139 applies to derivatives embedded in a life insurance contract unless the embedded derivative is itself a life insurance contract.
10.2.1 An insurer applies AASB 139 to its financial assets. Under AASB 139 a financial asset is classified and measured at fair value through profit or loss when is a financial asset that meets either of the following conditions:
(a) it is classified as held for trading does not meet the criteria specified in paragraph 4.1.2 of AASB 9 to be classified at amortised cost; or
(b) it is designated as “at fair value through profit or loss” upon initial recognition in accordance with paragraph 4.1.5 of AASB 9. An entity may use this designation when it is a contract with an embedded derivative and paragraph 11A of AASB 139 allows the entity to measure the contract as “at fair value through profit or loss”; or when doing so results in more relevant information, because either:
(i) it eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as ‘an accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases; or
(ii) a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the entity’s key management personnel (as defined in AASB 124 Related Party Disclosures), for example the entity’s board of directors and chief executive officer.
AASB 1 First-time Adoption of Australian Accounting Standards permits entities to designate financial assets as “at fair value through profit or loss” on first application of the Standard.
10.2.2 The view adopted in this Standard is that, in all but rare cases, financial assets within the scope of AASB 139 that back life insurance liabilities or life investment contract liabilities are permitted to be measured at fair value through profit or loss under AASB 139. This is because the measurement of life insurance liabilities under this Standard incorporates current information and measuring the financial assets backing these life insurance liabilities at fair value eliminates or significantly reduces a potential measurement inconsistency which would arise if the assets were classified as available for sale or and measured at amortised cost. In addition, under AASB 139, a group of financial assets may be designated as at fair value through profit or loss where it is both managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy. In the vast majority of cases, financial assets backing life investment contract liabilities and financial assets backing life insurance liabilities would be managed and their performance would be evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.
19.4 [Deleted by the AASB]
19.5 AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010), issued in December 2010, amended paragraphs 2.2.1, 2.2.2, 10.2, 10.2.1, 10.2.2, 10.5, 10.5.1, 10.6, 10.6.1, 10.7, 10.7.1, 10.7.2, 12.1, 12.1.1, 12.1.2, 17.5.4, 17.5.5 and 20.1 and paragraphs 16 and 17 in the Appendix. An entity shall apply those amendments when it applies AASB 9 as issued in December 2010.
20.1 In this Standard:
...
deposit component means a contractual component that is not accounted for as a derivative under AASB 139 Financial Instruments: Recognition and Measurement and would be within the scope of AASB 139 Financial Instruments: Recognition and Measurement if it were a separate instrument
...
Amendments to Interpretation 2 Amendments to Interpretation 2
Amendments to Interpretation 2
60 Below the heading ‘References’, the reference to AASB 139 is deleted and a reference to AASB 9 Financial Instruments is added.
61 Paragraph 15 is added:
15 AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010), issued in December 2010, amended paragraphs A8 and A10. An entity shall apply those amendments when it applies AASB 9 as issued in December 2010.
62 In the Appendix, paragraphs A8 and A10 are amended to read as follows:
A8 Members’ shares in excess of the prohibition against redemption are financial liabilities. The co-operative entity measures this financial liability at fair value at initial recognition. Because these shares are redeemable on demand, the co-operative entity determines the fair value of such financial liabilities as required by paragraph 5.4.3 of AASB 9, which states: ‘The fair value of a financial liability with a demand feature (eg a demand deposit) is not less than the amount payable on demand …’ Accordingly, the co-operative entity classifies as financial liabilities the maximum amount payable on demand under the redemption provisions.
A10 Following the change in its governing charter the co-operative entity can now be required to redeem a maximum of 25 per cent of its outstanding shares or a maximum of 50,000 shares at CU20 each. Accordingly, on 1 January 20x3 the co-operative entity classifies as financial liabilities an amount of CU1,000,000 being the maximum amount payable on demand under the redemption provisions, as determined in accordance with paragraph 5.4.3 of AASB 9. It therefore transfers on 1 January 20x3 from equity to financial liabilities an amount of CU200,000, leaving CU2,000,000 classified as equity. In this example the entity does not recognise a gain or loss on the transfer.
Amendments to Interpretation 5 Amendments to Interpretation 5
Amendments to Interpretation 5
63 Below the heading ‘References’, the reference to AASB 139 is deleted and a reference to AASB 9 Financial Instruments is added.
64 Paragraph 5 is amended to read as follows and paragraph 14A is added:
5 A residual interest in a fund that extends beyond a right to reimbursement, such as a contractual right to distributions once all the decommissioning has been completed or on winding up the fund, may be an equity instrument within the scope of AASB 9 and is not within the scope of this Interpretation.
14A AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010), issued in December 2010, amended paragraph 5. An entity shall apply that amendment when it applies AASB 9 as issued in December 2010.
Amendments to Interpretation 10 Amendments to Interpretation 10
Amendments to Interpretation 10
65 Below the heading ‘References’, the reference to AASB 139 is deleted and a reference to AASB 9 Financial Instruments is added.
66 Paragraphs 5, 6 and 11 are deleted, paragraphs 1, 2, 7 and 8 are amended to read as follows and paragraph 12 is added:
1 An entity is required to assess goodwill for impairment at the end of each reporting period, and, if required, to recognise an impairment loss at that date in accordance with AASB 136 Impairment of Assets. However, …
2 The Interpretation addresses the interaction between the requirements of AASB 134 Interim Financial Reporting and the recognition of impairment losses on goodwill in AASB 136, and the effect of that interaction on subsequent interim and annual financial statements.
7 The Interpretation addresses the following issue:
Should an entity reverse impairment losses recognised in an interim period on goodwill if a loss would not have been recognised, or a smaller loss would have been recognised, had an impairment assessment been made only at the end of a subsequent reporting period?
Consensus Consensus
8 An entity shall not reverse an impairment loss recognised in a previous interim period in respect of goodwill.
11 [Deleted by the IASB]
12 AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010), issued in December 2010, amended paragraphs 1, 2, 7 and 8 and deleted paragraphs 5, 6 and 11. An entity shall apply those amendments when it applies AASB 9 as issued in December 2010.
Amendments to Interpretation 12 Amendments to Interpretation 12
Amendments to Interpretation 12
67 Below the heading ‘References’, the reference to AASB 139 is deleted and a reference to AASB 9 Financial Instruments is added.
68 Paragraphs 23-25 are amended to read as follows, paragraph 28A is deleted and paragraph 28B is added:
23 AASB 132 Financial Instruments: Presentation and AASB 7 Financial Instruments: Disclosures and AASB 9 Financial Instruments apply to the financial asset recognised under paragraphs 16 and 18.
24 The amount due from or at the direction of the grantor is accounted for in accordance with AASB 9 as:
(a) at amortised cost; or
(b) measured at fair value through profit or loss.
25 If the amount due from the grantor is accounted for at amortised cost, AASB 9 requires interest calculated using the effective interest method to be recognised in profit or loss.
28A [Deleted by the IASB]
28B AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010), issued in December 2010, amended paragraphs 23-25 and deleted paragraph 28A. An entity shall apply those amendments when it applies AASB 9 as issued in December 2010.
69 Paragraphs IE7 and IE28 are amended to read as follows:
IE7 AASB 9 Financial Instruments may require the entity to measure the amounts due from the grantor at amortised cost, unless the entity designates those amounts as measured at fair value through profit or loss. If the receivable is measured at amortised cost in accordance with AASB 9, it is measured initially at fair value and subsequently at amortised cost, ie the amount initially recognised plus the cumulative interest on that amount calculated using the effective interest method minus repayments.
IE28 AASB 9 Financial Instruments may require the entity to measure the amount due from or at the direction of the grantor in exchange for the construction services at amortised cost. If the receivable is measured at amortised cost in accordance with AASB 9, it is measured initially at fair value and subsequently at amortised cost, ie the amount initially recognised plus the cumulative interest on that amount minus repayments.
Amendments to Interpretation 19 Amendments to Interpretation 19
Amendments to Interpretation 19
70 Below the heading ‘References’, the reference to AASB 139 is deleted and a reference to AASB 9 Financial Instruments is added.
71 Paragraphs 4(a), 5, 7, 9 and 10 are amended to read as follows and paragraph 14 is added:
4 This Interpretation addresses the following issues:
(a) Are an entity’s equity instruments issued to extinguish all or part of a financial liability ‘consideration paid’ in accordance with paragraph 3.3.3 of AASB 9?
Consensus Consensus
5 The issue of an entity’s equity instruments to a creditor to extinguish all or part of a financial liability is consideration paid in accordance with paragraph 3.3.3 of AASB 9. An entity shall remove a financial liability (or part of a financial liability) from its statement of financial position when, and only when, it is extinguished in accordance with paragraph 3.3.1 of AASB 9.
7 If the fair value of the equity instruments issued cannot be reliably measured then the equity instruments shall be measured to reflect the fair value of the financial liability extinguished. In measuring the fair value of a financial liability extinguished that includes a demand feature (eg a demand deposit), paragraph 5.4.3 of AASB 9 is not applied.
9 The difference between the carrying amount of the financial liability (or part of a financial liability) extinguished, and the consideration paid, shall be recognised in profit or loss, in accordance with paragraph 3.3.3 of AASB 9. The equity instruments issued shall be recognised initially and measured at the date the financial liability (or part of that liability) is extinguished.
10 When only part of the financial liability is extinguished, consideration shall be allocated in accordance with paragraph 8. The consideration allocated to the remaining liability shall form part of the assessment of whether the terms of that remaining liability have been substantially modified. If the remaining liability has been substantially modified, the entity shall account for the modification as the extinguishment of the original liability and the recognition of a new liability as required by paragraph 3.3.2 of AASB 9.
14 AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010), issued in December 2010, amended paragraphs 4(a), 5, 7, 9 and 10. An entity shall apply those amendments when it applies AASB 9 as issued in December 2010.
Amendments to Interpretation 127 Amendments to Interpretation 127
Amendments to Interpretation 127
72 Below the heading ‘References’, the reference to AASB 139 is deleted and a reference to AASB 9 Financial Instruments is added.
73 In the Consensus, paragraph 7 is amended to read as follows:
7 Other obligations of an arrangement, including any guarantees provided and obligations incurred upon early termination, shall be accounted for under AASB 137 Provisions, Contingent Liabilities and Contingent Assets, AASB 1023 General Insurance Contracts or AASB 9 Financial Instruments, depending on the terms.
74 Paragraphs 14 and 15 are amended to read as follows:
14 When an entity ... A financial asset and a financial liability, or a portion of either, are derecognised only when the requirements of paragraphs 3.2.1-3.2.23, 3.3.1-3.3.4, B3.2.1-B3.2.17 and B3.3.1-B3.3.7 of AASB 9 are met.
15 AASB 1023 provides guidance for recognising and measuring financial guarantees and similar instruments that provide for payments to be made if the debtor fails to make payments when due, if that contract transfers significant insurance risk to the issuer. Financial guarantee contracts that provide for payments to be made in response to changes in relation to a variable (sometimes referred to as an ‘underlying’) are subject to AASB 139.1
1 In December 2009 and December 2010 the AASB issued amendments to some of the requirements of AASB 139 and relocated them to AASB 9 Financial Instruments. AASB 9 applies to all items within the scope of AASB 139.