IndAS 109 : Financial Instruments CA Gautam Shah WIRC – Intensive course on IndAS 19 May 2017
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IndAS 109 : Financial Instruments
CA Gautam Shah
WIRC – Intensive course on IndAS19 May 2017
Setting the Context
Lets go back to history of standard on Financial Instrument
Setting the Context
IAS 25 Accounting for Investments
IAS 39 Financial Instrument
IFRS 9 Financial Instrument
Setting the Context
One of the most challenging standards because it’s sooo
complex and complicated.
Setting the Context
NOT ALWAYS…….
Most of principles and concepts are logical. Only in
some exceptional cases, it becomes complex…..
We are not dealing with those exceptions…. We will be discussing Principles and Concepts
GOOD NEWs……
Current Indian Relevant Accounting Standards
• AS 13 - Investment
• AS 30, 31, 32 – were issued but never notified. Guidance were
taken (Similar to IAS 32 and IAS 39)
• ICAI announcement for Derivative & Hedge Accounting
• Guidance note on Derivative accounting
• AS 11 – Forex Accounting
Introduction
Currently no specific Accounting Standards
• Debtors or Receivables
• Creditors or Trade Payables
• Borrowings & Equity
• Loans & Advances
• Guarantees & Commitments
Introduction
What does Scope of IndAS 109 Cover:
Introduction
Only One Thing……………
“FINANCIAL INSTRUMENTS”
Hence It is important to first ensure whether particular
instrument falls within definition of “Financial Instrument”
• Interest in subsidiaries, associates and joint venture (Ind AS 110, 27,28)
• Leases (Ind AS 17)
• Employee Benefits (Ind AS 19)
• Rights and Obligations under an insurance contract or a contract (Ind AS 104)
• A forward contract resulting into a business combination (Ind AS 103)
• Share based payments (Ind AS 102)
• Rights and obligation within the scope of (Ind AS 115)
Exceptions to Ind AS 109
Flow of Presentation
Identification
Classification
Measurement
Reclassification
Derecognition
Impairment
Hedge Accounting
Identification
Financial Asset and Financial Liability :
• Contractual Arrangement• Settlement Terms
Equity : Residual interest in Entity
• Variable number of shares – hence consideration amount is fixed
• Fixed number of shares – hence consideration amount is dependingon performance of co, hence Equity.
Concepts
What is a Financial Instrument?
Any “contract”
o Giving rise to a “financial asset” of one entity and
o “financial liability” or “equity” of another entity
Equity
A financial instrument is an equity instrument only if:
• the instrument includes no contractual obligation to deliver cash oranother financial asset to another entity; and
• if the instrument will or may be settled in the issuer’s own equityinstruments, it is either:
✓ a non-derivative that includes no contractual obligation for the issuer to deliver avariable number of its own equity instruments; or
✓ a derivative that will be settled only by the issuer exchanging a fixed amount ofcash or another financial asset for a fixed number of its own equity instruments.
What is an equity instrument?An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities
a) Cash
b) An equity instrument of another entity
c) A contractual right:1. To receive cash or another financial asset from another entity, or2. To exchange financial asset or financial liabilities with another entity
under conditions that are potentially favourable to the entity
d) A contract that will or may be settled in the entity’s own equityinstruments and is:
1. A non derivative for which the entity is or maybe obliged to receive avariable number of the entity’s own equity instruments
2. A derivative that will or may be settled other than by the exchange of afixed amount of cash or another financial asset for a fixed number of theentity’s own equity instruments.
Financial Asset
a) A contractual obligation1. To deliver cash or another financial asset to another entity2. To exchange financial assets or financial liabilities with another
entity under conditions that are potentially unfavourable to theentity
b) A contract that will or may be settled in the entity’s own equityinstruments and is:1. A non-derivative for which the entity is or may be obliged to deliver
a variable number of the entity’s own equity instruments
2. A derivative that will or may be settled other than by the exchangeof a fixed amount of cash or another financial asset for a fixednumber of the entity’s own equity instruments
Financial Liability
a. Sale of Goods on Credit
b. Sale of Goods on Credit and Settlement in Own Equity Shares
c. Advance Given
d. Advance Given for Delivery of Goods
e. Warranty Given
f. Warranty Given – In case of default of X part, the Company will pay INR 500
g. Statutory Payment Liability
h. Convertible Debentures
Quiz
X Ltd Sold Goods to Y Ltd. Normal Credit period is 30 days.
1. Y Ltd made payment in advance.
2. Y Ltd will make payment after 90 days.
Case Analysis
X Ltd. issues 10,000 preference shares. The instrument contains a condition thatthe issuer has to transfer a property to the holder of the instrument if it fails tomake dividend payments.
Should the instrument be classified as an equity or a financial liability ?
Case Analysis
1. Further Info Needed on Redeemable or Convertible – That will decideclassification of principal amount to Equity or Debt
2. For Fixed dividend = not linked to residual interest in Co, hence not equity
A financial instrument may contain a non-financial obligation that must besettled, if and only if, the entity fails to make distributions or to redeem theinstrument. In case the entity can avoid transfer of cash or another financialasset only by settling the non-financial obligation, the financial instrument is afinancial liability.
In the given case of X Ltd., in case the entity fails to make dividend paymenton 10,000 preference shares, it has to transfer a property to the holder of theinstrument which becomes non-financial obligation. Hence, the instrument beclassified a financial liability.
Solution to Case Analysis
Classification
Concepts
AmortisedCost
Fair Value through Other Comprehensive income (FVOCI)
Certain Debt instruments
Certain equity instruments
Fair Value through profit or loss (FVTPL)
Test for Classification:➢ Business Model Tests➢ Contractual Cash flow Tests
Financial Assets
Debt Instrument• Terms of Instrument• Intention of the holder
• SPPI – Amorised Cost• SPPI + Sale – FVOCI• Others – FVTPL
Equity• Default – FVTPL• Can Elect – FVOCI (Realised gain/loss also in OCI)
Derivative• FVTPL, except Hedge accounting
Concepts
Financial Liabilities
Amortised CostExcept• Trading Liability
• Designated as FV
Classification of Financial Assets
Classification of Financial Assets
Debt
Business Model Test (at an aggregate level)
Held for Trading ?
Conditional Fair value option (FVO) elected ?
Contractual cash flow characteristics test (‘at instrument level’)
Hold to collect contractual cash flow
collect contractual cash flow & selling FA
Neither of the two
NoNo
Pass
Yes
Yes
Amortised Cost FVOCI (with recycling) FVTPL
• For any testing of classification of any financial asset, its contractual termsmust give rise on a specified date to the cash flows that are solely consist of:
A. PrincipalB. Interest on the Principal Amount Outstanding
• Definition:
Principal – Fair Value of asset on initial recognition
Interest – Consideration for time value of money, credit risk, other basic lending risk (Liquidity Risk), other associated cost (Admin cost) and profit margin.
Fair value of asset on initial recognition.
Contractual Cash Flow Characteristic Test
Hold the asset to collect contractual cash flow
Hold the asset to collect contractual cash flow and for sale
• The business model is determined at a level that reflects how groups of financial assets are managed together to achieve a particular business objective.
• The business model is determined by the entity’s key management personnel in the way that assets are managed and their performance is reported to them.
• Identification of Business Model is a subjective concept and shall vary from company to company. It cannot be identified on the basis of any single factor but needs to consider all the available evidences as on date.
Business Model Assessment Test
Meets the two requirements to be measured at amortisedcost or FVTOCI
Available OptionTo designate, at initial recognition, at FVTPL
if doing so eliminates or significantly reduces ameasurement or recognition inconsistency ('accountingmismatch') that would otherwise arise from measuringassets or liabilities or recognising the gains and losses onthem on different bases.
Fair Value Option (FVO)
Debt Instrument (Basic Loan features)- Example
Held to collect contractual cash flows
Not held to collect contractual cash flows
Amortised cost(FVO available if criteria are met)
Fair value through profit or loss
Debt Instrument (embedded derivative)- Example
Hybrid contract (as a whole) has basic loan features and is Held to collect contractual CFs
All other hybrid contracts with financial hosts
Whole instrument at amortised cost
Whole instrument at fair value through profit or loss
Classification of Financial Assets
Equity
Held for Trading ?
FVOCI option selected
Fail
Yes
Yes
No
No
FVOCI (no recycling)
FVTPL
Equity Instrument- Example
Held for trading
Not held for trading
Fair value - with changes recognised in profit or loss
Fair value – irrevocable choice of recognising
changes in profit or loss or OCI
Classification of Financial Liabilities
All financial liabilities
Amortised cost
FVO for mismatch,
managed on FV basis
Own credit in
OCI
Except
Held for tradingFair value through
P&L
Fair Value Designation:
• Doing so eliminates or significantly reduces accountingmismatch
• Part of group of assets which are evaluated on a fair valuebasis
• Embedded Derivatives
Classification of Financial Liabilities
What is ‘own credit’?➢ Fair value changes in liability arising from changes in the
issuer’s credit quality
What is the concern?➢ Gain when credit quality deteriorates, loss when credit quality
improves
FV change due to own credit - To recognise in OCI
Financial Liabilities (FVO and Own Credit)
Measurement
Concepts
Initial Measurement at Fair Value
Normally Transaction Value is Fair value, unless in exceptional cases
Transaction Cost – For FVTPL in PL, Other category, to be added to cost
Subsequent Measurement
Amortised Cost – IRR
Fair Value as at reporting date and gain/loss in OCI or PL
What is Amortized Cost Method ?
Amortized Cost is the cost of an asset or liability, as adjusted, to achieve a constant effective rate of interest over the life of the asset or a liability.
• In common parlance, Amortized Cost method involves calculation ofpresent value of all future cash flows (contracted cash flows) expectedfrom a particular instrument throughout its life at the market prevailingrate of interest or expected yield.
• Transaction Cost that are capitalized would also form a part the cash flowon Day 1 and would be considered for calculation of present value.
• The component that would finally be debited to the P&L would be theinterest calculated on the basis of above method.
What is Amortized Cost Method ?
Example:
A debt security has a FV of Rs. 100,000 which will be repaid at maturity in 5 years.
The coupon rate of the instrument is 6% payable annually at the end of each year until maturity.
X Ltd purchase the said security in market for Rs. 93,400 (including transaction cost of Rs.100)
Based on market rate of 7.64%, calculate amortized cost and reported interest income in each year.
What is Amortized Cost Method ?
Solution:
Year OpeningCash Flows
(I+P)Reported
Income at 7.64%
Amortization of Debt
DiscountClosing
1 93,400 6,000 7,133 1,133 94,533
2 94,533 6,000 7,220 1,220 95,753
3 95,753 6,000 7,313 1,313 97,066
4 97,066 6,000 7,413 1,413 98,479
5 98,479 106,000 7,521 1,521 -
Reclassification
Concepts
Reclassification
• Recognition and measurement is depending on classification of FA
• Classification is based on certain principles, hence if there is change in principles –reclassification need to be done
• On initial recognition, if entity has opted from FV, hence same can not be reclassified.
• Measurement to be done on date of reclassification
When can we reclassify?
Reclassification is possible:When and only when, an entity changes its business model for managing financial assets
What is NOT a change in business model?• A change in intention related to particular financial assets• A temporary disappearance of a particular market for financial assets• A transfer of financial assets between parts of the entity with different business
models
What is a change in business model?Management decides to sell portfolio of mortgages, which were hold initially till maturity
• No reclassification for financial liabilities
• No reclassification for FA or FL designated at Fair Value
• No reclassification for Equity Instrument – Designated as FVOCI – Can not be reclassified
– FVOCI designation only permitted at initial recognition, hence no reclassification of FVTPL
• To apply prospectively
Reclassification
Original Revised Treatment
Amortised Cost FVTPL FV on reclassification date. Difference in PL
FVTPL Amortised Cost FV on reclassification date becomes new carrying vale. EIR computed based on new carrying vale.
Amortised Cost FVOCI FV on reclassification date. Difference in OCI
FVOCI Amortised Cost FV on reclassification date becomes new carrying vale. Cumulative Gain/loss in OCI to be adjusted to fair value.
FVPL FVOCI Asset @ FV. No change to previous FV gain/loss.
FVOCI FVPL Asset @ FV. Cumulative Gain/loss in OCI to be adjusted to PL.
Measurement on reclassification
Derecognition
Concepts
Derecognition
Derecognition based on contractual terms
Need to assess substance of transaction – If entity continue to enjoy cashflows, may need to continue recognition of asset
Measurement of gain/loss on derecognition
When can we derecognize?
Before we decide whether to derecognize or not, we need to determine WHAT we are dealing with
• A financial asset (or a group of similar financial assets) in its
entirety, or
• A part of a financial asset (or a part of a group of similar financial
assets) meeting specified conditions.
After we determine WHAT we derecognize, then we need derecognize the asset when :
• The contractual rights to the cash flows from the financial asset
expire – that’s an easy and clear option; or
• An entity transfers the financial asset and the transfer qualifies for
the derecognition – that’s more complicated.
Derecognition of Financial Assets
START
Entire asset or part?
DERECOGNIZE
Transfer of
rights?
Rights to cash flows
expired?
Risk/rewards transfer
?
Oblig-ation to pay CF?
Risk/rewards retaine
d?
Control retaine
d?
CONTINUE TO RECOGNIZE
DERECOGNIZE
CONTINUE TO RECOGNIZE
DERECOGNIZE
YES
NO NO YES NO NO
YESYES
YES
YESNO NO
Proceeds receivedCashOther Financial Assets received
Less: Carrying amount (measured at date of disposal)THUS: first have to restate balance
=Profit or loss on disposal recognized in P/L
Therefore, IF SOLD AT FV= no profit or loss
Derecognition Amount
Impairment - ECL
Concepts
Expected Credit Loss• On origination of FA, there is some expected credit loss, hence provision for same. • Matching concept of risk, revenue and provision
ECL approach will depend on:
• FA generated from exchange of cash or other FA like loansGeneralised Approach. To assess credit risk of counter party to compute ECL
• FA generated from giving services or goods like Trade ReceivablesSimplified Approach. Based on past overdue of receivables, provisions to be done
Financial Asset IFRS 9 Classification Impairment TestingRequired?
Debt Instrument Amortised Cost Yes
FVOCI Yes
FVTPL No
Equity Any No
Lease receivable Yes
Trade Receivables Yes
Loan Commitment Yes
Financial Guarantees Yes
Impairment
Not applicable to any instrument measured at FVPL
Impairment
Approaches
General Approach• FA measured at Amortised Cost, FVOCI• Financial Guarantees• Loan Commitment
Simplified Approach• Trade Receivables• Lease Receivable
General Approach
EL = PD * LGD * EAD
Expected Loss (EL) as at reporting date
Probability of Default (PD) – Assessed based on External Rating, Past History of performance
Loss Given Default (LGD) - Amount of loss if there is Default. Normally Collateral Securities are considered
Exposure At Default (EAD) – The total exposure to credit risk is the amount that the borrower owes to the lending institution at the time of default
General Approach
This newly adopted standard lays down “Three-Stage” Model for impairment based on change in the credit quality since initial recognition:
12-month expected credit losses
Are a portion of the lifetime expected credit losses and represent the amount of expected credit losses that result from default events that are possible within 12 months after the reporting date.
Lifetime expected credit losses
The expected credit losses that result from all possible default events over the life of the financial instrument.
Credit loss Contractual Cashflows less Expected Cashflows
General Approach
Dual Measurement approach
Under the general principle, one of two measurementbases will apply:– 12-month expected credit losses; or– lifetime expected credit losses.
The measurement basis would depend on whether there has been a significant increase in credit risk since initial recognition.
Changes in operating results
Information to take into account for assessment of increased credit risk
Changes in external market
indicators
Changes in credit ratings
Changes in internal price
indicators
Changes in business
Other qualitative inputs
30 days past due
rebuttable presumption
However….
General Approach
Objective Evidence : Stage 3
Expected credit losses
Financial assets
• ECL represent a probability-weighted estimate of the difference over the remaining life of the financial instrument, between:
Undrawn loan commitments
• ECL represent a probability-weighted estimate of the difference over the remaining life of the financial instrument, between:
Present value of cash flows according to
contract
Present value of cash flows the entity
expects to receive
Present value of cash flows if holder draws
down
Present value of cash flows the entity
expects to receive if drawn down
General Approach
Banks – Regulatory PD and IndAS 109 PD
• Twelve-month expected credit losses used for regulatory purposesare normally based on ‘through the cycle’ (‘TTC’) probabilities of adefault (that is, probability of default in cycleneutral economicconditions) and can include an adjustment for prudence.
• PD used for IndAS 109 should be ‘point in time’ (‘PiT’)probabilities (that is, probability of default in current economicconditions) and do not contain adjustment for “prudence”.
• However, regulatory PDs might be a good starting point, providedthey can be reconciled to IndAS 109 PDs.
General Approach
Simplified Approach
The simplified approach does not require an entity to track thechanges in credit risk, but, instead, requires the entity to recognisea loss allowance based on lifetime ECLs at each reporting date,right from origination.
ECL provision can be done based on provision matrix. i.e. dayspass due.
Primarily applied to Trade Receivables, Lease Receivables
Trade and Lease Receivables and Contract Assets
Lease receivables Trade receivables and contract assets with a significant financing component
Trade receivables and contract assets without a significant financing component
Policy election to apply
General ApproachSimplified Approach
Loss allowance always equal to lifetime expected credit losses
On 31 December 20X1, Bank grants a loan to • A borrower with credit rating of A @ interest rate of 10%• B borrower with credit rating of BB @ interest rate of 12%
The price of the loan does not reflect incurred credit losses
Loss Allowance recognition - Illustration
Q: What loss allowance Bank should recognise in the statement of financial position at 31 December 20X1 for A Ltd and B Ltd
A. NoneB. 12-month expected credit lossesC. Lifetime expected credit losses
B. 12-month expected credit losses.
Loss Allowance recognition - Rationale
• Under the general model of IND AS 109, all assets need to have a loss allowance.
• Allowance covers either 12-month or lifetime expected credit losses depending on whether the asset’s credit risk has increased significantly.
• Since the loan has just been granted and there has not been a significant increase in credit risk, an allowance equal to 12-month expected credit losses is appropriate.
Hedge
Concepts
Hedge Accounting
Hedge Item – What Company wants to HedgeHedge Instrument – Instrument executed for Hedging, generally Derivatives.
Objective of Hedge – To cover RiskObjective of Hedge Accounting – To eliminate accounting mis-match due to hedge
Hedge Accounting is optional. If opted, need to comply with all required documentation and disclosures
Fair Value Hedge – To hedge fair value of existing assetExisting assets FV is accounted in PL, hence FV of Hedged instrument also in PL
Cash Value Hedge – To hedge future cashflowFuture cashflows i.e. no existing asset to hedge, hence FV of hedged instrument is parked in OCI. Recycled when actual cashflow happens.
Hedge accounting : To mitigate Accounting mis-match
Hedge accounting recognizes• the offsetting effects of changes in the fair values or
• the cash flows of the hedging instrument and the hedged item.
Strict conditions must be met before hedge accounting is possible:
• there must be formal designation and documentation of a hedge,including the risk management strategy for the hedge
• the hedging instrument must be expected to be highly effective inachieving offsetting changes in fair value or cash flows of thehedged item that are attributable to the hedged risk.
Hedge Accounting
• Hedge exposure to fair value changes of recognised asset or liability orunrecognised firm commitment (or portion of these attributable to aparticular risk)
• Hedge of the foreign currency risk of a firm commitment
• Recognition of gains and losses on hedged item and hedging instrumentin profit and loss and adjust the carrying amount of the hedged item (ifnot measured at FV)
Fair Value Hedge
➢ Borrowing in FCY USD 10 Million
➢ Hedged with Currency Swap
Objective of Hedge is to Hedge Fair Value of Borrowings – Hence FVHedge
• FV of Borrowing and Swap in PL
• If Borrowing @ Amortised Cost, FV of Swap is in PL with similaradjustment to carrying value of Borrowing to eliminate accountingmis match
Fair Value Hedge Accounting - Example
Hedge of the exposure to variability in cash flows attributable to aparticular risk associated with
➢ a recognized asset or liability or➢ a highly probable forecast transaction
Hedge of the foreign currency risk of a firm commitment
Portion of hedge deemed to be effective:➢ gains and losses recognized in OCI
Portion of hedge deemed to be ineffective:➢ gains and losses recognized in profit or loss
Treatment of cumulative gains or losses differs based on what ‘type’of asset or liability is subsequently recognized
Cash Flow Hedge
▪ Entity intend to do Export after 2 months. Wants to hedge FCY riskon future cash flows
▪ Enters in to Forward contract
Objective is to hedge future cash flows
No existing asset on books, hence FV of forward is parked in OCI.When export happens, recycle FV gain/loss from OCI to PL
Cash Flow Hedge - Example
Hedge Accounting - Summary
QUIZ
CASE 1▪ A Ltd borrowed USD 10 million @ interest rate ‘LIBOR + 200bps’.
▪ Interest Rate Swap to convert floating cashflows to fixed cashflows
CASE 2▪ A Ltd borrowed USD 10 million @ interest rate 10%.
▪ Interest Rate Swap to convert fixed interest rate to floating interestrate linked to market.
CASE 3▪ A Ltd borrowed USD 10 million @ interest rate ‘LIBOR + 200bps’.
▪ Cross Currency Interest Rate Swap to hedge FCY and convertfloating cashflows to fixed cashflows
GAAP differences
AS Ind AS
Scope:
Only Investments under AS 13 Wider – All FI like investments, tradereceivables, loans & advances, borrowings..
Classification:
Current and Long term FI classified in 3 categories - Amortized Cost(AC), FVTOCI and FVTPL
Initial Recognition – at Cost Initial Recognition – at FV
Measurement:
• Current investment - lower of cost or FV
• Long term investment - cost less provisionfor diminution other than temporary.
• AC using EIR• FVTPL & FVTOCI at fair value with
changes routed through in PL or OCIrespectively
Measurement loss - charged to PL and gain isignored
Measurement gain or loss - charged as pertheir classification categories
No concept of fair value of FL FL – mainly at AC, if designated then FVTPL
Financial Instruments
AS Ind AS
• AS 11 – Covers forward exchangecontracts
• GN – Other derivative instruments(applicable from April 01, 2016)
• Ind AS 109 covers all derivativeinstruments
• Trade Forwards- marked to market onreporting date. Losses and Gains both tobe accounted in PL.
• Hedge - Premium to be amortized andcontract to be revalued on the reportingdate
• All derivatives should be fair valued.Losses and Gains both to be accounted inPL
• Hedge• Fair Value Hedge – PL• Cashflow Hedge – OCI
Impact
▪ Less guidance on derivatives (except Forwards) resulted in varied practices▪ Ind AS will lead to standard industry practices▪ Hedge (Cashflow Hedge & Fair Value Hedge) Documentations – For taking benefit of
hedged accounting, else transaction to be accounted as trading
Derivatives
Impact on Financials
Impact on Financials
I-GAAP +/- Impact of Ind AS
Share Capital + Equity component of Compound Financial Instrument+ Compulsorily convertible debentures+ Equity component of Borrowings
- Mandatory redeemable preference sharesReserves and Surplus +/ - Impact of Opening Balance Sheet Other Comprehensive Income (OCI)
+/ - Amounts recognised in OCI as per previous slide
Impact :• Key ratios like debt-equity ratio, ROCE, EV etc• Preference shares as fund raising instrument may not remain attractive• Substance over Form for accounting of Debentures/ Other Instruments and resultant
impact on ratios
I-GAAP +/- Impact of Ind AS
Non Current Liabilities(i) Long-term borrowings +/ -
--
To be accounted at Amortized Cost. Interest to be accounted at Effective Interest RateEquity component of liability Puttable Equity
(ii) Long-term Liabilities - Initial Recognition at Fair Value (Discount to PV)Subsequently, to be recorded at Amortized Cost –May not have material impact
(iii) Long term provisions - Provisions to be recorded at present value
Current Liabilities(i) Short-term borrowings - Initial Recognition of FL at Fair Value.
Subsequent measurement at Amortized Cost, except for FL designated as FVTPLStatutory Dues are recorded at Carrying Value
(ii) Trade payables(iii) Other current liabilities
(iv) Short-term provisions No Material Impact
Impact on Financials
I-GAAP +/- Impact of Ind AS
Non Current Assets
Fixed Assets + Arrangement containing Finance Lease (IFRIC 4)
- Service Concession Agreement (IFRIC 12) De-recognition of Fixed Assets and Recognition of Financial Asset/ Intangible Asset
Impact on Financials
I-GAAP +/- Impact of Ind AS
Non Current Investments
Investment in Subsidiary/ JV/ Associate
+/ - Option:Cost under Ind AS 27FVTPLFVTOCI
Other Long Term Investments +/ - Classification, Recognition and Measurement as per Ind AS 109 i.e. @ Amortised Cost if satisfy conditions else @ Fair Value.
_ Transaction Cost to be charged to PL for FVTPL
Impact on Financials
I-GAAP +/- Impact of Ind AS
Long term loans and advances +/ - Financial Assets to be initially recognised at FV. Subsequent recognition at FV or Amortized Cost
Other non-current assets +/ -
Deferred tax assets (net) Impact as per previous slide on deferred tax
Impact on Financials
I-GAAP +/- Impact of Ind AS
Current Assets(a) Inventories + WIP for Service Companies(b) Current investments
(c) Trade receivables
(d) Cash and cash equivalents
(e) Short-term loans and advances
+/ -+/ -
+/ -
+/ -
All derivative transactions at FVAmortised cost or FV
Generally no impact. FV impact if different credit period. Impairment @ ECL
No Impact
No Material Impact
(f) Other current assets +/ - No Material Impact
Impact on Financials
Applicable to all most all Companies
What applies to most companies are – Logical and Not Complex
Complex Transactions – Complex Accounting Primarily for Financial Services and Banks
Most treatments in IndAS109 – Apply logic and reflect substance of transaction
Conclude…..
Thank You
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