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    Ifrs-9 IFRIC 19

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    talhaahmed158

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    Ifrs-9 IFRIC 19

    Uploaded by

    talhaahmed158
    10 views5 pages

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    Copyright:

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    10 views5 pages

    Ifrs-9 IFRIC 19

    Uploaded by

    talhaahmed158

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 5

    IFRS

    9 DERECOGNITION OF FINANCIAL LIABILITY

    A financial liability is The difference between


    derecognized only the carrying amount
    when extinguished of a financial liability
    i.e. when the obligation extinguished or transferred
    specified in the contract to a 3rd party and the
    is discharged or consideration paid is
    cancelled or expired. recognised in P/L.
    IFRS
    EXTINGUISHING FINANCIAL LIABILITIES WITH EQUITY INSTRUMENTS
    9
    [IFRIC 19]
    BACKGROUND AND SCOPE

    Loan
    Borrower Lender
    Settlement of loan =
    Equity Shares of Borrower

    Terms of a liability might be renegotiated such that the lender


    (creditor) accepts equity instruments as payment instead
    of cash.

    IFRIC 19 sets out how a borrower that issues equity instruments


    to extinguish all or part of financial liability should account
    for the transaction.
    IFRS
    EXTINGUISHING FINANCIAL LIABILITIES WITH EQUITY INSTRUMENTS
    9
    [IFRIC 19]
    BACKGROUND AND SCOPE

    Following transactions are scoped out of IFRIC 19:

    Transactions with the creditor in its capacity as an existing shareholder


    (e.g. a rights issue);

    Lender and borrower are controlled by the same party or parties before and
    after the transaction; or

    Issue of equity shares to extinguish debt is in accordance with original terms


    of financial liability (such as convertible debt).
    ISSUES CONSENSUS

    Are equity instruments issued to Issue of equity instruments is “consideration paid” to


    extinguish financial liability considered extinguish all or part of a financial liability. This leads
    “consideration paid”? to derecognition of the liability.

    If fair value of equity instrument issued is reliably measurable

    Equity instruments issued would be initially measured


    at fair value of the issued equity instruments.

    If fair value of equity instrument issued is NOT reliably measurable


    How should an entity initially
    measure the equity instruments Equity instrument issued would be measured at fair
    issued? value of the liability extinguished.

    If fair value of equity instrument issued and liability


    extinguished are NOT reliably measurable

    Equity instrument issued would be measured at


    carrying value of the liability extinguished.

    How should the entity account for any Difference between the carrying amount of liability
    difference between the carrying amount extinguished and consideration paid must be
    of the liability and the equity instruments recognised in P/L.
    issued? Separate line item or disclosure in the notes is required.
    IFRS
    EXTINGUISHING FINANCIAL LIABILITIES WITH EQUITY INSTRUMENTS
    9
    [IFRIC 19]
    PART EXTINGUISHMENT – ADDITIONAL CONCERNS

    If only part of the financial liability is extinguished, entity is


    required to assess whether some of the consideration paid
    relates to a modification of the terms of the outstanding liability.

    If some of the consideration paid relates to modification of terms


    of remaining liability, the entity allocates the consideration paid
    between;

    Part of the liability extinguished; and

    Part of the liability that remains outstanding.

    and apply “modification of financial liability” rules accordingly.

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