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Thread: 26 - Indian Accounting Standard (Ind AS) 39 - Earlier Accounting standard - (30) - Financial Instruments: Recognition and Measurement

  1. #211
    IND-AS
    Guest

    Thumbs up Ind AS 39 and Ind AS 21 Fair value hedge of asset measured at cost of Indian Accounting Standard (Ind AS) 39 - Earlier Accounting standard - (30)

    Ind AS 39 and Ind AS 21 Fair value hedge of asset measured at cost of Indian Accounting Standard (Ind AS) 39 - Earlier Accounting standard - (30)

    Financial Instruments: Recognition and Measurement

    Appendix - G


    F.6.5. Ind AS 39 and Ind AS 21 Fair value hedge of asset measured at cost

    If the future sale of a ship carried at historical cost is hedged against the exposure to currency risk by foreign currency borrowing, does Ind AS 39 require the ship to be remeasured for changes in the exchange rate even though the basis of measurement for the asset is historical cost?

    No. In a fair value hedge, the hedged item is remeasured. However, a foreign currency borrowing cannot be classified as a fair value hedge of a ship since a ship does not contain any separately measurable foreign currency risk. If the hedge accounting conditions in Ind AS 39.88 are met, the foreign currency borrowing may be classified as a cash flow hedge of an anticipated sale in that foreign currency. In a cash flow hedge, the hedged item is not remeasured.

    To illustrate: a shipping entity in Denmark has a US subsidiary that has the same functional currency (the Danish krone). The shipping entity measures its ships at historical cost less depreciation in the consolidated financial statements. In accordance with Ind AS 21.23(b), the ships are recognised in Danish krone using the historical exchange rate. To hedge, fully or partly, the potential currency risk on the ships at disposal in US dollars, the shipping entity normally finances its purchases of ships with loans denominated in US dollars.

    In this case, a US dollar borrowing (or a portion of it) may be designated as a cash flow hedge of the anticipated sale of the ship financed by the borrowing provided the sale is highly probable, for example, be cause it is expected to occur in the immediate future, and the amount of the sales proceeds designated as being hedged is equal to the amount of the foreign currency borrowing designated as the hedging instrument. The gains and losses on the currency borrowing that are determined to constitute an effective hedge of the anticipated sale are recognised in other comprehensive income in accordance with Ind AS 39.95(a).


  2. #212
    IND-AS
    Guest

    Thumbs up Section - G - Other of Indian Accounting Standard (Ind AS) 39 - Earlier Accounting standard - (30)

    Section - G - Other of Indian Accounting Standard (Ind AS) 39 - Earlier Accounting standard - (30)

    Financial Instruments: Recognition and Measurement

    Appendix - G


    Section - G - Other

    G.1- Disclosure of changes in fair value

    Ind AS 39 requires financial assets classified as available for sale (AFS) and financial assets and financial liabilities at fair value through profit or loss to be remeasured to fair value. Unless a financial asset or a financial liability is designated as a cash flow hedging instrument, fair value changes for financial assets and financial liabilities at fair value through profit or loss are recognised in profit or loss, and fair value changes for AFS assets are recognised in other comprehensive income. What disclosures are required regarding the amounts of the fair value changes during a reporting period?

    Ind AS 107.20 requires items of income, expense and gains and losses to be disclosed. This disclosure requirement encompasses items of income, expense and gains and losses that arise on remeasurement to fair value. Therefore, an entity provides disclosures of fair value changes, distinguishing between changes that are recognised in profit or loss and changes that are recognised in other comprehensive income. Further breakdown is provided of changes that relate to:

    (a) AFS assets, showing separately the amount of gain or loss recognised in other comprehensive income during the period and the amount that was reclassified from equity to profit or loss for the period as a reclassification adjustment;

    (b) financial assets or financial liabilities at fair value through profit or loss, showing separately those fair value changes on financial assets or financial liabilities (i) designated as such upon initial recognition and (ii) classified as held for trading in accordance with Ind AS 39; and

    (c) hedging instruments.

    Ind AS 107 neither requires nor prohibits disclosure of components of the change in fair value by the way items are classified for internal purposes. For example, an entity may choose to disclose separately the change in fair value of those derivatives that in accordance with Ind AS 39 it categorises as held for trading, but the entity classifies as part of risk management activities outside the trading portfolio.

    In addition,Ind AS 107.8 requires disclosure of the carrying amounts of financial assets or financial liabilities at fair value through profit or loss, showing separately: (i) those designated as such upon initial recognition and (ii) those held for trading in accordance with Ind AS 39.


  3. #213
    IND-AS
    Guest

    Thumbs up Ind AS 39 and Ind AS 7 Hedge accounting: statements of cash flows of Indian Accounting Standard (Ind AS) 39 - Earlier Accounting standard - (30)

    Ind AS 39 and Ind AS 7 Hedge accounting: statements of cash flows of Indian Accounting Standard (Ind AS) 39 - Earlier Accounting standard - (30)

    Financial Instruments: Recognition and Measurement

    Appendix - G


    G.2. Ind AS 39 and Ind AS 7 Hedge accounting: statements of cash flows

    How should cash flows arising from hedging instruments be classified in statements of cash flows?


    Cash flows arising from hedging instruments are classified as operating, investing or financing activities, on the basis of the classification of the cash flows arising from the hedged item. While the terminology in Ind AS 7 has not been updated to reflect Ind AS 39, the classification of cash flows arising from hedging instruments in the statement of cash flows should be consistent with the classification of these instruments as hedging instruments under Ind AS 39.


  4. #214
    IND-AS
    Guest

    Thumbs up Appendix - 1 of Indian Accounting Standard (Ind AS) 39 - Earlier Accounting standard - (30)

    Appendix - 1 of Indian Accounting Standard (Ind AS) 39 - Earlier Accounting standard - (30)

    Financial Instruments: Recognition and Measurement

    Appendix - G


    Appendix - 1

    Comparison with IAS 39, Financial Instruments: Measurement and Recognition


    Note: This appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the differences between Indian Accounting Standard (Ind AS) 39 and the corresponding International Accounting Standard (IAS) 3 9, Financial Instruments; Recognition and Measurement issued by the International Accounting Standards Board.

    1. A provision has been added in Ind AS 39 that in determining the fair value of the financial liabilities which upon initial recognition are designated at fair value through profit or loss, any change in fair value consequent to changes in the entity’s own credit risk shall be ignored. IAS 39 requires all changes in fair values in such liabilities to be recognised in profit or loss.

    2. IAS 39 does not change the requirements relating to employee benefit plans that comply with IAS 26, Accounting and Reporting by Retirement Benefit Plans. Ind AS 39 does not mention so as IAS 26 is not relevant for companies

    3. The transitional provisions given in IAS 39 and IFRIC 6, IFRIC 16 and IFRIC 19 have not been given in Ind AS 39, since Accounting Standard corresponding to IFRS 1, First-time Adoption of International Financial Reporting Standards, will deal with the same. The transitional provisions given in IAS 39 and IFRIC 6, IFRIC 16 and IFRIC 19 have not been given in Ind AS 39, since all transitional provisions related to Ind ASs, wherever considered appropriate have been included in Ind AS 101, First-time Adoption of Indian Accounting Standards corresponding to IFRS 1, First-time Adoption of International Financial Reporting Standards

    4. Different terminology is used, as used in existing laws e.g., the term ‘balance sheet’ is used instead of ‘Statement of financial position’ and ‘Statement of profit and losses’ is used instead of ‘Statement of comprehensive income’.

    5. The following paragraph numbers appear as ‘Deleted ‘in IAS 39. In order to maintain consistency with paragraph numbers of IAS 39, the paragraph numbers are retained in Ind AS 39 :

    (i) paragraph 2(f)

    (ii) paragraph 3


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