Financial instruments accounting continues to respond and adapt to the changing circumstances of the global economy. The COVID-19 coronavirus pandemic had far reaching implications for the capital markets whilst issues such as benchmark reform, and standard setting in relation to financial instruments with characteristics of equity, have the potential to affect corporates and banks alike. In addition many organisations continue to grapple with the 2018 implementation of AASB 9.
As financial products continue to evolve, together with changes in economic conditions and regulations, organisations will continue to face challenges in accounting for financial instruments.
What are the financial instruments accounting standards?
The suite of financial instruments accounting standards principally comprises:
- AASB 9 Financial Instruments
- AASB 132 Financial Instruments: Presentations
- AASB 7 Financial Instruments: Disclosures
- and in some instances, AASB 139 Financial Instruments: Recognition and Measurement.
The introduction of AASB 9 in 2018 introduced a new framework for financial instruments accounting which many organisations continue to grapple with, however, what hasn’t changed is that the substance and contractual terms of an arrangement play an important part in the financial reporting of an organisation’s financial arrangements.
Whether it is dealing with the classification of funding as debt or equity, accounting for sales of financial assets, modification of debt arrangements, hedge accounting or impairment, accounting for financial instruments is a nuanced affair. Our insights will help you understand the requirements of this standard as they relate to your company, as well as offering insights and guidance on the application of IFRS® Standards.
Financial Instruments Q&A
We provide answers to common questions on the application of accounting standard AASB 9 Financial Instruments.
- How does a borrower account for a waiver of loan repayments?
- How does a borrower account for loan repayment holidays obtained during the COVID-19 pandemic?
- When do loan modifications result in derecognition?
- How does a borrower account for a modification to a prepayable fixed rate loan?
- What is the impact of modifying a floating rate loan?
- How do new costs and fees impact modification accounting?
- Does the effective interest rate change with non-substantial loan modifications?
- How does a borrower account for loan renegotiation costs?
- How are unamortised transaction costs accounted for on loan modification?
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