Part Reconciliation with ARF 320.0 Statement - Financial Sector (Collection of Data) (reporting standard) determination No. 22 of 2006 - Reporting Standard ARS 320.4 - Bill Acceptances and Endorsements - Reconciliation with ARF 320.0 Statement of Financial Position (Domestic Books) (ARF 320.0) | Zoe
Financial Sector (Collection of Data) (reporting standard) determination No. 22 of 2006 - Reporting Standard ARS 320.4 - Bill Acceptances and Endorsements
Reconciliation with ARF 320.0 Statement Reconciliation with ARF 320.0 Statement of Financial Position (Domestic Books) (ARF 320.0)
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This form is to be completed by all locally incorporated banks, foreign authorised deposit-taking institutions (ADIs) and Special Service Providers (SSPs) on a Domestic books basis.
The Domestic books of the locally incorporated banks, foreign ADIs and SSPs relates to the Australian books of the Australian ADI and has the following scope:
is an unconsolidated report of the Australian licensed ADI's operations/transactions that are booked inside Australia;
exclude offshore branches of the Australian licensed ADI from this reporting unit;
exclude offshore banking units based overseas from this reporting unit;
do not consolidate Australian and offshore controlled entities or associated entities that are not ADIs;
include Australian based offshore banking units of the licensed ADI; and
include transactions with non-residents recorded on Australian books.
Securitisation deconsolidation principle
Except where stated otherwise on this form, reporting entities must treat any securitisation program special purpose vehicles (SPVs) in which the ADI (or a member of its consolidated group) participates in accordance with APRA’s clean sale and separation requirements as non-consolidated independent third parties. As a result, for reporting purposes all assets, liabilities, revenues and expenses of these SPVs must be excluded from the ADI’s reported amounts. Where relevant, report on this form any exposure to or other transaction between the ADI and any such SPV as if such transaction was conducted with an independent third party, regardless of whether the SPV or its assets is consolidated for accounting purposes.
APRA's clean sale and separation requirements are set out in APS 120 Funds Management and Securitisation and related Guidance Notes AGN 120.3 Purchase and Supply of Assets (including Securities Issued by SPVs) and AGN 120.1 Disclosure and Separation. Whenever the clean sale and separation requirements are not met, all the assets, liabilities, revenues and expenses of the SPV are to be consolidated with the ADI’s reported amounts.
Reporting period
The form is to be completed as at the last day of the reporting month. Locally incorporated banks, foreign ADIs and SSPs should submit the completed form to APRA within 10 business days after the end of the relevant reporting month.
Unit of measurement
Banks are asked to complete the form in millions of Australian dollars rounded to one decimal place. SSPs are asked to complete the form in whole Australian dollars (no decimal place).
Amounts denominated in foreign currency are to be converted to AUD in accordance with AASB 121 The Effects of Changes in Foreign Exchange Rates (AASB 121).
The general requirements of AASB 121 for translation are:
foreign currency monetary items outstanding at the reporting date must be translated at the spot rate at the reporting date;[1]
foreign currency non-monetary items that are measured at historical cost in a foreign currency must be translated using the exchange rate at the date of the transaction;[2]
foreign currency non-monetary items that are measured at fair value will be translated at the exchange rate at the date when fair value was determined.
Transactions arising under foreign currency derivative contracts at the reporting date must be prepared in accordance with AASB 139 Financial Instruments: Recognition and Measurement (AASB 139). However, those foreign currency derivatives that are not within the scope of AASB 139 (e.g. some foreign currency derivatives that are embedded in other contracts) remain within the scope of AASB 121.
For APRA purposes equity items must be translated using the foreign currency exchange rate at the date of investment or acquisition. Post acquisition changes in equity are required to be translated on the date of the movement.
As foreign currency derivatives are measured at fair value, the currency derivative contracts are translated at the spot rate at the reporting date.
Exchange differences should be recognised in profit and loss in the period which they arise. For foreign currency derivatives, the exchange differences would be recognised immediately in profit and loss if the hedging instrument is a fair value hedge. For derivatives used in a cash flow hedge, the exchange differences should be recognised directly in equity.
The ineffective portion of the exchange differences in all hedges would be recognised in profit and loss; and
translation of financial reports of foreign operations.
A foreign operation is defined in AASB 121 as meaning an entity that is a subsidiary, associate, joint venture or branch of a reporting entity, the activities of which are based or conducted in a country or currency other than those of the reporting entity.
Exchange differences relating to foreign currency monetary items that form part of the net investment of an entity in a foreign operation, must be recognised as a separate component of equity.
Translation of financial reports should otherwise follow the requirements in AASB 121.
Timing
Report assets and liabilities as at the date change of ownership took place.
Netting
Unless otherwise specifically stated, institutions are to comply with the prerequisite for netting outlined in Australian accounting standards AASB 139, AASB 132 Financial Instruments: Disclosure and Presentation and AASB 7 Financial Instruments: Disclosures and any relevant prudential standards.
Term to maturity
References to term to maturity in this form are references to original term to maturity
Valuation and currency conversion
Closing balances should be reported at market price effective at the reference date. Where denominated in foreign currency, market values in foreign currency should be converted to AUD at the spot rate effective as at the reference date.
Basis of preparation
Unless otherwise specifically stated, institutions are to comply with Australian accounting standards regarding the measurement of asset, liability and equity items.
Definitions
A bill of exchange is an unconditional order drawn (issued) by one party, sent to another party (usually a bank) for acceptance and made out to, or to the order of, a third party, or to bearer. It is a negotiable instrument with an original term to maturity of 180 days or less.
Accepted bills of exchange have been signed by a bank as the drawee which "accepts" liability to pay out the funds on the due date.
Endorsement of a bill of exchange creates a contingent liability by the endorser to pay out the funds conditional on the bearer/holder demanding payment.
Specific instructions
Bill acceptances and endorsements by drawer
Report the amount of bills of exchange that have been accepted or accepted and endorsed by this ADI at market value by counterparty of drawer. Only endorsed bills where the bank is the first endorser of a non-ADI or Registered Financial Corporation accepted bill should be included.
Include:
holdings of own acceptances or endorsed bills.
Exclude:
bills of exchange neither accepted nor endorsed;
endorsed bills drawn by the general government; and
bills of exchange held by this ADI, but accepted by another party.
Reconciliation with ARF 320.0 Statement of Financial Position (Domestic Books) (ARF 320.0)
Total acceptances of customers
The sum of:
total non-financial counterparties - accepted (ARF 320.4 Bill Acceptances and Endorsements) (ARF 320.4);
total financial corporations - accepted (ARF 320.4); and
less holdings of own acceptances.
equals:
acceptances of customers (ARF 320.0).
Example - Treatment of own holdings of own acceptances
Suppose that a company (called the drawer or borrower) draws a bill of exchange payable in 180 days. The ADI then accepts these bills, and therefore accepts liability to pay to the person presenting the bill (called the holder) the face value of the bill on maturity. The ADI, as acceptor of the bill, will on maturity of the bill require the drawer (borrower) to pay the face value of the bill to the ADI.
This bill acceptance is reported on ARF 320.4 by the ADI accepting the bill at market value, which at inception is equal to the face value of the bill minus the discount, whether or not the bill is held within the ADI’s portfolio.
If this bill is accepted and not held within the ADI's portfolio, then this acceptance is reported on ARF 320.0 as a liability item "Acceptances", which represents the liability arising from the acceptance of the bill of exchange. A corresponding contra asset is reported as "Acceptances of customers", which represents the drawers' commitment to repay the face value of the bill to the ADI at maturity.
Holdings of own bill acceptances
If this bill is accepted and held within the ADI's own portfolio it should be included as an asset on ARF 320.0 and classified to either trading or investment securities. This type of bill acceptance is excluded from the liability item "Acceptances" on the ARF 320.0, since the ADI is also the holder of the bills. It is also excluded from the contra asset item "Acceptances of customers", since this claim on the drawer is classified as a security holding.
Holdings of own bill acceptances should also be reported to bills of exchange (bank accepted) on ARF 320.1 Debt Securities Held (ARF 320.1). Bills purchased by the bank, which are accepted by other ADIs, will also be classified to trading or investment securities, and reported to bills of exchange (bank accepted) on ARF 320.1.