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.

Treatment of embedded derivatives on first-time adoption?

Treatment of embedded derivatives on first-time adoption? How are embedded derivatives treated on first-time adoption? As per Ind AS 101, the assessment of embedded derivative that requires to be separated from the host contract and accounted for as a derivative should be based on the conditions that existed on the date …
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Designate a previously recognised financial instrument

Designate a previously recognised financial instrument How should an entity designate a previously recognised financial instrument? A financial liability may be designated as a liability measured at fair value through profit or loss provided it eliminates or significantly reduces the accounting mismatch. The requirement for such a designation is that it must …
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Recognition of financial instruments on first-time adoption

Recognition of financial instruments on first-time adoption Financial assets and financial liabilities are allowed to be recognised at fair value only on initial recognition, subject to the fulfilment of certain requirements. How are these dealt with during first-time adoption? An entity is required to measure a financial asset or financial liability …
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Difference between mandatory exceptions and optional exemptions

Difference between mandatory exceptions and optional exemptions What is the difference between mandatory exceptions and optional exemptions? Whenever an entity follows an accounting standard as prescribed by Ind AS, then the entity is required to comply with the standard from the inception of the entity and make necessary changes in its financial …
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Hedge accounting be applied only prospectively

Hedge accounting be applied only prospectively Why should hedge accounting be applied only prospectively and not retrospectively? To implement hedge accounting, there should be a complete set of documentation available that fully describes a hedging relationship including designation of hedged item, hedging instrument and several other requirements. On first-time adoption, the …
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Accounting for an undesignated fair value hedge

Accounting for an undesignated fair value hedge When an entity adopts Ind AS for the first time, how will an undesignated fair value hedge be accounted for? At the transition date, it is likely that hedging instruments may not be recognised or valued. So, an entity as on the date of transition …
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Treatment when hedge accounting not qualified

Treatment when hedge accounting not qualified An entity follows hedge accounting as per previous GAAP. However, the same does not qualify for hedge accounting as per Ind AS 109. What should the entity do? If a hedging relationship does not qualify for hedge accounting as per Ind AS 109, such hedge accounting …
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First-time adoption while classifying a financial instrument

First-time adoption while classifying a financial instrument There are several judgemental decisions which an entity is required to make at the inception of a financial instrument. What should an entity do on first-time adoption to classify and measure such financial instrument? The conditions for classification and measurement of financial assets are …
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Effective rate of interest during the first-time adoption

Effective rate of interest during the first-time adoption How will the effective rate of interest be computed 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 element, be it revenue …
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Impact of impairment requirements on first-time adoption

Impact of impairment requirements on first-time adoption How do the impairment requirements impact on first-time adoption? An entity shall apply the impairment requirement retrospectively.At the date of transition to Ind ASs, an entity shall use reasonable and supportable information that is available without undue cost or effort to determine the credit risk …
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