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International Accounting Standards (IAS)
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| U.S. GAAP | IFRS, IAS | Accounting Topics |
International Accounting Standard (IAS) 39
Financial Instruments: Recognition and Measurement
International Financial
Reporting Standards (IFRS) |
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International Accounting
Standards (IAS) |
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U.S. GAAP by Topic |
| International Accounting Standard (IAS) 39 |
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IAS 39
Financial Instruments: Recognition and Measurement Issued in
March 1999 Revised in
December 2003 Recent amendment:
by IFRS 3 revised in January 2008 |
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Hedge Accounting |
| Financial Instruments: Recognition and Measurement |
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Initial
recognition --> A financial asset or financial liability is initially recognized at fair value. Financial
assets and financial liabilities are recognized --> when the entity becomes a party to the contract |
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Subsequent
measurement of financial assets --> financial assets are measured at fair value --> derivatives that are assets are measured at fair value
Exceptions:(1) held-to-maturity investments --> measured at amortised cost (2) loans and receivables --> measured at amortised cost (3) investments in equity instruments (whose fair value cannot be reliably measured) --> measured at cost |
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Subsequent
measurement of financial liabilities --> financial liabilities are measured at amortised cost
Exceptions:(1) financial liabilities at fair value through profit or loss --> measured at fair value (2) financial guarantee contracts --> measured at the higher of (2a) and (2b) (2a) amount determined by IAS 37 (2b) initially recognized amount - cumulative amortisation (3) commitments to provide a loan at a below-market interest rate --> measured at the higher of (3a) and (3b) (3a) amount determined by IAS 37 (3b) initially recognized amount - cumulative amortisation |
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Four
categories of financial instruments (1) A financial asset or financial liability at fair value through profit or loss (2) Held-to-maturity investments (3) Available-for-sale financial assets (4) Loans and receivables |
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Reclassification (1) A reclassification into the fair value through profit or loss category --> not allowed (2) A reclassification out of the fair value through profit or loss category --> not allowed |
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A gain or
loss on a financial asset or financial liability at
fair value through profit or loss --> recognized in profit or loss |
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A gain or
loss on an available-for-sale financial asset --> recognized in other comprehensive income |
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A gain or
loss on financial assets and financial liabilities carried at amortised cost --> recognized in profit or loss through amortisation process --> recognized in profit or loss when they are derecognized or impaired |
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What is a
derivative? A derivative is a financial instrument or other contract that has all of the following characteristics: (1) settled at a future date (2) requires no initial net investment or initial net investment required is smaller than what would normally be required in other contact types (3) its value changes --> as the value of an underlying variable changes. |
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Examples
of underlying variables: (1) interest rate (2) foreign exchange rate (3) commodity price (4) price of a financial instrument (5) price index |
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Hedging, fair
value hedge, cash flow hedge |
