Dudy K - Day 1 Session 2 - IAI Seminar

8/6/2019 Dudy K - Day 1 Session 2 - IAI Seminar

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This material is solely used for the 5th IFRS Regional Policy Forum.

No part of it may be circulated, quoted, or reproduced for distribution without prior written approval from

The Indonesian Institute of Accountants (Ikatan Akuntan Indonesia)

Development of Standardson Financial Instruments

in Indonesia- Evolution or Revolution?

presentasi by

D udi M . K urniaw an

I F RS I mplement at ion Commit t ee

Bali , M ay 25, 2005

Agenda

Introduction

History of Financial Instruments standards in Indonesia

Standards based on IAS 32 and IAS 39

Some Implementation issues

Upcoming standards:

Adoption of IFRS 7

Adoption of IFRS 9


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5/27/2011 3

5/27/2011 4


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Financial Instruments

PSAK 50 R

Presentation andDisclosures

Recognitionand

Measurement

Standards on Financial Instruments

- current state

PSAK 55 R

History ofFinancial Instruments Standards

PSAK 50 (1998) Accounting for Certain Investments in Securities

PSAK 55 (1998) - Accounting for Derivatives and Hedging

PSAK 55 (Revised 1999) : postponed PSAK 55 (1998) until 1 January 2001

PSAK 50 (Rev 2006) Financial Instruments: Presentation and Disclosures

PSAK 55 (Rev 2006) Financial Instr.: Recognition and Measurement

PSAK 50R 55 R: postponed from 2009 to 2010

.


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History of

Financial Instruments Standards

..

PSAK 50 (Rev. 2010) Financial Instruments: Presentation

PSAK 60 - Financial Instruments: Disclosures

Beyond 2012:Adoption of IFRS 9

Adoption of Improvements to IFRS 9

Financial Assets:Classification

Fair ValueThrough Profit or Loss

(FVTPL)

Held to Maturity

(HTM)

Loans andReceivables

Availablefor Sale

(AFS)


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Financial Assets.

Why classification is important

Financial assets Measurement Changes reported in

Fair Value ThroughProfit or Loss

Fair Value Income Statement (P/L)

Loans and Receivables Amortised Cost Income Statement

Held to Maturity Amortised Cost Income Statement

Available for Sale Fair Value Other ComprehensiveIncome

FVTPL Held to Maturity

Loans and receivables

Available for Sale

Reclassifications of FinancialInstruments


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Liabilities vs. Equity

Sometimes not easy to differentiate

Focus is on substance rather than on form

Beware of compound instruments

Impairment of Financial Assets

When there is an objective evidence that a loss hasoccurred

Example:

Carrying

Amount

PV ofCashFlows

Impairment


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Consolidation of subs

Part or entire asset?

Right to cash flow expire?

Right to cash flow transfrd

Passthrough arangement?

Substantially all risk &rewards transferred?

Substantially all risk &rewards retained?

Control retained ?

Continuing involvement

NO

NO

YES

NO

NO

YES

Derecognition

YES

Derecognition

Derecognition

No derecognition

No derecognition

NO

YES

YES

NO

YES

Derecognition of Financial Assets

Derivatives

Three characteristics of a derivative:

its value changes

in response tothe change

in an underlying

requires no initialnet investment or

an initial net investmentthat is relatively smaller

settled at a future date


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Derivatives

Derivatives measured at FV P/LChange in FV

Is the

contractcarried at FV

through P/ L

Would it be a

derivative ifit was

freestanding

Is it

closelyrelated

to thehost

contract

Splitands

eparatelyaccount

Do not split out the embedded derivative

NO YES NO

YES YESNO

Embedded derivatives


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Hedge accounting

Types of Hedges:

Fair Value hedges

Cash Flow hedges

Hedges of a Net Investment

Fair Value Hedges

Hedging instruments at FV

Changes in FV of Hedged item

P/L

P/L

Gain or loss

Gain or loss

Ineffectiveness is recognized in P/L


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Cash Flow Hedges

Hedging instruments at FV OCIGain or loss

Ineffectiveness is recognized in P/L

When hedged transactioaffects earnings

P/L

PSAK 50 R & 55 R:Some Implementation Issues

Complexity of PSAK 50 & 55 standards

IT system changes

Determination of fair values

Impairment of financial assets

Determination and bifurcation of derivatives and embedded

derivatives

Enhanced disclosures on risk management activities

Hedge accounting, a privilege seldom used

Transitional provision


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IFRS 9:

Classification of Financial Assets

Amortized Cost Fair Value

Based on business model for managing Financial Assetsand contractual cash flows characteristics of Financial Assets

IFRS 9:Other changes

Financial assets:

If Fair Value -> through P/L (FVTPL)

But there is an option for investments in equity not held for

trading -> FVTOCI Option for amortized cost assets -> FVTPL

Embedded derivatives not bifurcated any more (except where the hostis not assets within the scope)

FV hybrid contract in its entirety

Reclassifications only when there is a change in business model

Financial liabilities:

bifurcation is still applicable


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PSAK 60 (based on IFRS 7):

Financial Instrument - Disclosures

Classes of financial instruments and disclosures

Significance of financial instruments for financial positionsand performance

Nature and extent of risks:

Qualtitative

Quantitative (credit risks, liquidity risks, market risks)

Enhance disclosures on fair value measurements andliquidity risks

Three level hierarchy for fair value measurements

Questions?

Thank you

Dudy K - Day 1 Session 2 - IAI Seminar

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