Ind AS 109
Explore preserved RVSBELL Analytics articles by accounting standard, regulatory topic, service area, and search-priority content.
Effective interest Rate
The rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset or to the amortised cost of a financial liability.
Own use exemption as per the Accounting Standard
Contracts that are entered into for the purpose of the receipt or delivery of a non-financial item for the entity's own use is excluded from the scope of
Accounting treatment for FVOCI Instruments
Is there any difference between the accounting treatment for equity instruments and debt instruments classified as Fair Value Through Other Comprehensive Income (FVOCI)? The answer is ‘yes’. Frequently participants in my class ask me the underlying reason for such a difference in the accounting treatment when both these types of financial assets are classified as FVOCI.
Are RBI circulars relevant for ECL computation as per Ind AS 109?
The Reserve Bank of India (RBI) vide its notification dated 12th Nov 2021, has prescribed a revised criteria for classifying NPAs. The question is whether the Reserve Bank of India circulars that prescribe the criteria for classification of loans as non performing should be considered for computation of expected credit loss according to Ind AS 109?
Credit adjusted effective interest rate
The credit adjusted effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the
Modification of contractual cash flows
The gross carrying amount of the financial asset is recalculated as the present value of the renegotiated or modified contractual cash flows that are discounted at the financial asset’s original effective interest rate (or credit-adjusted effective interest rate for POCI financial assets) or, when applicable, the revised effective interest rate calculated after a fair value hedge. Any costs or fees incurred adjust the carrying amount of the modified financial asset and are amortised over the remaining term of the modified financial asset.
What is SPPI test?
SPPI test means Solely Payment of Principal and Interest.
Difference between amortised cost & held-to-maturity
A financial asset shall be measured at amortised cost if both of the following conditions are met:
FVOCI (equity instruments) and FVOCI (debt instruments)
Debt instruments are classified as FVOCI if and only if both the following conditions are satisfied, viz, (a) financial asset is held within the business
Is there a choice to designate as FVTPL?
The option to designate a financial asset at fair value through profit or loss (FVTPL) is not without restrictions. There are certain conditions to be
Separately accounting for an embedded derivative
When a hybrid contract contains a host contract and it is not a financial asset, the embedded derivatives portion should be separated from the host and
Treatment of transaction costs
Ind ASs relating to financial instruments
What is the concept of effective interest method?
Effective interest method is a new concept that is introduced through the Ind AS standards. Effective interest rate is relevant not merely for financial
Gains and losses on assets measured at FVOCI
A gain or loss on a financial asset measured at fair value through other comprehensive income shall be recognised in other comprehensive income, except for
Debt instrument measured at FVOCI
For financial assets that are debt instruments measured at FVOCI, both the amortised cost and the fair value of the instrument are relevant. The reason for this is the objective of categorising a debt instrument as FVOCI is that both the contractual cash flows characteristic and the fair value of the instrument are relevant as the asset is held to receive contractual cash flows as well as to buy or sell such assets.
Derecognition of a financial asset
An entity shall derecognise financial assets when and only when the contractual rights to the cash flows from the financial assets expire or it transfers the
Contract meant for own use
If the derivative contract is a purchased call option or a future contract to buy a non-financial item, this may be covered under the own use exemption, as a
Impairment model for different categories of financial assets
No. Ind AS 109 has a single impairment model that applies to all financial instruments within its scope. As per the previous version of IFRS 9, viz, IAS 39,
Ind AS for financial instruments replica of IFRS?
Ind AS 32 is the converged standard of IAS 32. Ind AS 109 is the converged Ind AS of IFRS 9. Ind AS 107 is the converged Ind AS of IFRS 7. As on date, it may
Effective Rate of Interest - EIR
Effective Interest Rate (EIR) as per Indian Accounting Standards (Ind AS) is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, where appropriate, a shorter period to the net carrying amount of the financial asset or financial liability.
SPPI test & business model objective test
SPPI test refers to the evaluation of contractual cash flows that analyses if such cash flows represent solely payments of principal and interest on the
Long-term financial liability classified as FVTPL
Yes. An entity may, on initial recognition, designate a financial liability as measured at fair value through profit or loss. If an entity exercises this
Foreign currency risk in a firm commitment as a fair value hedge
No. A hedge of the foreign currency risk associated with such firm commitments may be designated as a cash flow hedge or as a fair value hedge. The reason is
Contractual cash flows & effective interest rate
When the contractual cash flows of a financial asset are renegotiated or otherwise modified and the renegotiation or modification does not result in the
Reclassification of a financial asset
When, and only when, an entity changes its business model for managing financial assets it shall reclassify all affected financial assets to reflect the
Classification of derivative instruments
Derivative instruments are a subset of financial instruments. In the definition of financial asset, we have the following phrase, viz, “to exchange financial
What is an embedded derivative?
An embedded derivative causes some or all of the cash flows that otherwise would be required by the contract to be modified according to a specified interest
What is a hybrid contract?
A hybrid contact is one that includes a non-derivative host and an embedded portion. An embedded derivative is a component of a hybrid contract. The cash
What is a Financial instrument?
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Can a corporate entity still follow settlement date accounting?
As per Ind AS 109, a regular way purchase or sale of financial assets shall be recognised, as applicable, using trade date accounting or settlement date
Loss allowance as per Ind AS 109
Previously entities used to provide for losses on certain financial assets on an ad hoc basis that means several practices which are now prohibited expressly
Contract is settled through the entity’s own equity instrument
A contract that will be settled by the entity receiving or delivering a fixed number of its own shares for no future consideration or exchanging a fixed
Recognition of financial instruments on first-time adoption
An entity is required to measure a financial asset or financial liability at its fair value. Where the fair value at initial recognition differs from the
Gains and losses on a financial instrument
A gain or loss on a financial asset or financial liability that is measured at fair value should be recognised in profit or loss account. For an investment in
Effective rate of interest during the first-time adoption
Effective interest rate is a key concept that runs through the entire gamut of Ind AS standards, more so for the financial instruments, as the interest
Ind ASs relating to financial instruments
Financial instruments are primarily governed by three standards as per Ind AS, viz, Ind AS 32, Ind AS 109 and Ind AS 107.
Difference between time value of money and modified time value of money
Time value of money is the element of interest that provides consideration for only the passage of time. That is, the time value of money element does not
What are treasury shares and how are these presented
If an entity acquires its own equity instruments, these instruments are known as ‘treasury shares’ and are deducted from equity. No gain or loss shall be
Contract to deal in non-financial item
A contract to deal with a non-financial item is not a financial instrument. However, there are certain contracts to buy or sell a non-financial item that may
Derecognise financial assets/financial liabilities retrospectively
Financial assets and liabilities that are derecognised as per the previous GAAP requirements should not be recognised as per Ind AS merely because the
Designation of contracts deal a non-financial item on first time adoption
Ind AS 109 allows a contact to buy or sell a non-financial item to be designated at fair value through profit or loss provided it is done at inception without
Current standards for financial instruments as per AS?
Currently there are no accounting standards that specifically address financial instruments except for certain forward foreign exchange contracts covered by
Measurement categories for financial assets
Principal measurement categories for financial assets are amortised cost, fair value through other comprehensive income – FVOCI and fair value through
Consequence of not de-recognising an asset after the sale
When an entity continues to recognise an asset to the extent of its continuing involvement, the entity also recognises an associated liability. The
First-time adoption while classifying a financial instrument
The conditions for classification and measurement of financial assets are based on the facts and circumstances that exist at the date of transition to Ind AS
Change in contractual cash flows
A proper assessment should be made afresh whenever there could be contractual term potentially changing the timing or amount of the contractual cash flows. A
Gains and losses from liabilities designated as FVTPL
An entity shall present a gain or loss on a financial liability that is designated as at fair value through profit or loss as follows:
Financial asset categorised as FVOCI
A financial asset shall be measured at fair value through other comprehensive income if both of the following conditions are met:
What does Interest represent?
While interest is predominantly the consideration for time value of money, it also includes consideration for the credit risk associated with the principal