Offsetting financial instruments for financial institutions

Offsetting financial instruments for accounting purposes is a complex area of accounting for many financial institutions.

FAQ 44.29.3 – How should fractional shares allocated in a customer’s brokerage account be accounted for by the broker/dealer?

In many cases, shares purchased by a customer are accounted for off-balance sheet by the broker/dealer because the broker/dealer does not bear the risks/rewards of the shares deposited in the customer’s accounts and holds these shares in segregated custody on the customer’s behalf.

FAQ 42.41.1 – Assessing SPPI for sustainability linked loans or loans with ‘green variability’

Entities might issue loans where the interest rate is linked to certain environmental, social and governance (ESG) metrics. These loans are often referred to as ‘green’ loans – that is, loans whose contractual terms provide for the cash flows to vary depending on borrower-specific ESG metrics or other environmental measures (collectively, ‘green measures’). Examples of green measures referred to in such loans include measures relating to compliance with emissions and waste regulation standards, energy efficiency metrics, CO2 emissions standards, energy consumption standards relating to the asset being financed, or a sustainability index that measures the performance of an entity based on a basket of different green measures. These loans can also be referred to as ‘Sustainability Linked Loans’ or SLLs.

FAQ 42.59.2 – How are the criteria for reclassification of financial assets and the timing of reclassification assessed?

Paragraph 4.4.1 of IFRS 9 requires an entity to reclassify financial assets when, and only when, the entity changes its business model for managing those assets. Such changes are determined by the entity’s senior management as a result of external or internal changes, and they must be significant to the entity’s operations and demonstrable to external parties in accordance with paragraph B4.4.1.

06 October 2022

Credit-impaired financial assets

There are a number of different measurement, derecognition, presentation and disclosure considerations which can be overlooked when accounting for and reporting credit-impaired financial assets (sometimes referred to as 'stage 3' or 'defaulted'). To help identify and address these, this practice aid gathers together different possible IFRS considerations when dealing with financial asset(s) that are credit-impaired.

25 May 2022

Sales of loans and other amortised cost assets

When loans or other amortised cost financial assets are being sold, derecognition is naturally a key accounting focus. However, there are many other measurement, presentation and disclosure considerations, which can be overlooked. To help identify and address these, this practice aid gathers together different possible considerations when an entity is disposing of loan assets carried at amortised cost.