Derecognise financial assets/financial liabilities retrospectively
Can an entity 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 previous derecognition as per the previous GAAP is not consistent with the Ind AS requirements and, as such, do not qualify for derecognition as per Ind AS. In other words, derecognition of financial instruments should be done only prospectively and not retrospectively. Certain transactions to liquidate the financial assets may not qualify such financial assets to be derecognised till the risk and rewards as well as the control are given up by the entity. One of the examples where the entity does not derecognise an asset is where the entity transfers the asset and also acquires a corresponding right to buy back at a pre-determined rate and not at the fair value of such assets. However, an entity is allowed to apply derecognition requirements specified in Ind AS 109 retrospectively provided all the necessary information needed to implement the same is available with the entity at the time of initial recording of those transactions. The entity in effect can even retrospectively apply its requirements from a date of an entity’s choice.