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An introduction to IFRS
for investment funds
Link n’ Learn
28 August 2014
© 2014 Deloitte & Touche
Presenters
Darren Griffin
Audit Director
Sang Eui Han
Audit Manager
An Instruction to IFRS for Investment Funds 2
© 2014 Deloitte & Touche
Agenda
IFRS and Investments Funds 2
Introduction 1
Format of IFRS Financial Statements for Funds 3
4 IFRS for Investment Funds
An Introduction to IFRS for Investment Funds 3
IFRS and Investment Funds
© 2014 Deloitte & Touche
IFRS Framework
• The IFRS Framework encompasses all standards and interpretations
approved by the IASC (IAS) and by the IASB (IFRS).
• IFRS is currently required or permitted in more than 120 countries (including
countries which adopted full IFRS equivalents).
• The Conceptual Framework sets out the concepts which are the basis of
preparation and presentation of financial statements for external users.
• New pronouncements and amendments may have a significant impact on
the financial statements of an investment fund.
• Terms that we will use in the presentation: • Presentation – how items are disclosed in the financial statements
• Recognition/(De)recognition - Incorporation or recording of the monetary effects of a
business transaction into books of account or financial statements.
• Measurement - Quantification of economic activities in terms of money.
An Introduction to IFRS for Investment Funds 5
© 2014 Deloitte & Touche
What is useful about IFRS as applied to investment
funds…
Is IFRS beneficial for fund reporting?
Written
Guidance
Provide written detailed guidance (e.g. Trade date vs. Settlement date
accounting, how to fair value certain financial assets, amortisation of
discounts or premiums on debt instruments
Enhances worldwide comparability
Principles – based standards facilitate implementation
Constantly being reviewed and revised by representatives around the world
Enhances transparency (e.g. detailed disclosure on risk and related parties
and related transactions)
Comparability
Flexibility
Evolving
Transparency
An Introduction to IFRS for Investment Funds 6
© 2014 Deloitte & Touche
What is useful about IFRS as applied to investment
funds…
Is IFRS beneficial for fund reporting?
Fund Industry
specificities
IAS/IFRS are accounting standards that are generic and do not recognise
different industries.
Critique that IFRS generally does not take fund investor needs into account
There is limited guidance on the application of IFRS to the fund industry
(as for example available in the US GAAP – Industry Guide for Investments
Companies)
Specific gaps have presented difficulties in the practical application of
IFRS to investment funds (see reports issued by EFAMA & ICI)
Investor
needs
Limited
guidance
Practical
application
An Introduction to IFRS for Investment Funds 7
© 2014 Deloitte & Touche
Most relevant standards for investment funds reporting
under IFRS
IAS 1 Presentation of Financial Statements
IAS 7 Statement of Cash Flows
IAS 24 Related Party Disclosures
IAS 38 Intangible Assets
IAS 27 Separate Financial Statements
IFRS 10 Consolidated Financial Statements
IAS 32 Financial Instruments: Presentation
IAS 39 Financial Instruments: Recognition
IFRS 7 Financial Instruments: Disclosures
IFRS 9 Financial Instruments (to replace IAS 39 once effective)
IFRS 13 Fair Value Measurement
An Introduction to IFRS for Investment Funds 8
Format of IFRS Financial Statements for Funds
© 2014 Deloitte & Touche
IAS 1 – Presentation of financial statements
• No specific industry guidance under IFRS for Funds
• Funds Apply IAS 1 “Presentation of Financial Statements”
A complete set of financial statements should include the following:
• Statement of financial position
• Statement of comprehensive income
• Statement of changes in equity
• Statement of cash flows
• A summary of accounting policies and other explanatory notes
Items not specifically required under IFRS but which may be required under
companies acts / listing rules / UCITS or NON-UCITS Regulations
• Directors’ report
• Investment Manager’s report
• Custodian’s report
• Schedule of investments / schedule of changes in portfolio
An Introduction to IFRS for Investment Funds 10
© 2014 Deloitte & Touche
IAS 1 – Presentation of financial statements
Key concepts:
GOING CONCERN
ASSUMPTION
ACCRUALS BASIS
OFFSETTING COMPARATIVES
MATERIALITY AND
AGGREGATION
CONSISTENCY OF
PRESENTATION
An Introduction to IFRS for Investment Funds 11
© 2014 Deloitte & Touche
Example: Statement of Financial Position
12 An Introduction to IFRS for Investment Funds
Assets
As at
30/06/14
CU’000
As at
30/06/13
CU’000
Current assets
Cash and cash equivalents 270 139
Interest receivable 387 677
Dividends receivable 370 541
Receivable from brokers 3 3
Financial assets at fair value through profit or loss 198,245 127,448
Financial assets at fair value through profit or loss
pledged as collateral 36,579 15,957
Total assets 235,854 144,765
Liabilities
Current liabilities
Accrued expenses 659 416
Due to brokers 13 8
Borrowings 25,227 10,005
Financial liabilities at fair value through profit or loss 1,411 2,064
Withholding tax payable 8 5
Total liabilities (excluding net assets attributable to holders of
redeemable shares) 27,318 12,498
Net assets attributable to holders of redeemable shares 208,536 132,267
Statement of financial position
As at 30 June 2014
© 2014 Deloitte & Touche
Statement of comprehensive income
For the year ended 30 June 2014
Year ended
30/06/14
CU’000
Year ended
30/06/13
CU’000
Revenue
Interest income 3,327 909
Dividend income 909 1,631
Net realized gains/(losses) on financial assets and liabilities at fair value
through profit or loss (79,860) (24,480)
Net change in unrealized gains/(losses) on financial assets and liabilities
held at fair value through profit or loss 155,741 (244,301)
Net foreign currency gains/(losses) 993 3,551
Total operating income 81,110 (262,690)
Expenses
Interest expense (3) (2)
Management fees (1,998) (2,851)
Performance fees (88) (174)
Custodian fees (216) (443)
Administration fees (138) (76)
Transaction costs (107) (321)
Professional fees (7) (10)
Director’s fees (15) (15)
Other expenses (7) (1)
Total operating expenses (2,579) (3,893)
Operating profit/(loss) 78,531 (266,583)
Finance costs
Interest expense (386) (1,419)
Distribution to holders of redeemable shares (2,000) -
Profit/(loss) after distributions and before tax 76,145 (268,002)
Withholding taxes (87) (60)
Profit/(loss) after distributions and tax 76,058 (268,062)
Increase/(decrease) in net assets attributable to holders of
redeemable shares 76,058
(268,062)
Example: Statement of Comprehensive Income
13 An Introduction to IFRS for Investment Funds
© 2014 Deloitte & Touche
The statement of cash flows analyses changes in cash and cash
equivalents during a period.
Cash and cash equivalents comprise cash on hand and demand deposits,
together with short-term, highly liquid investments that are readily convertible
to a known amount of cash, and that are subject to an insignificant risk of
changes in value.
IAS 7 - Statement of Cash Flows
The direct
method
shows each
major class
of gross cash
receipts and
gross cash
payments
The indirect
method
adjusts
accrual basis
net profit or
loss for the
effects of
non-cash
transactions
Operating cash flows generated from the main
revenue-producing activities
Financing activities cash flows used for
the activities that alter the equity
Investing cash flows used for the acquisition and disposal of
long-term assets
An Introduction to IFRS for Investment Funds 14
© 2014 Deloitte & Touche
Statement of cash flows
For the year ended 30 June 2014
Year ended
30/06/14
CU’000
Year ended
30/06/13
CU’000
Cash flows from/(used in) operating activities:
Increase in net assets attributable to holders of redeemable shares 76,058 (268,062)
Adjustments for:
Interest income (3,327) (909)
Dividend income (909) (1,631)
Finance costs recognized in profit or loss 2,386 1,419
Withholding tax expense recognized in profit or loss 87 60
Net (increase)/decrease in financial assets at fair value through profit or loss (91,419) 275,835
Net (increase)/dercease in financial liabilities at fair value through profit or loss (653) 488
Net (increase)/decrease in receivables/payables from/to brokers 5 (5)
Net (increase)/decrease in accrued expenses 243 797
Cash (used in)/provided by operations (17,529) (7,992)
Interest received 3,617 868
Dividends received 1,080 1,090
Withholding taxes paid (84) (55)
Net cash (used in)/provided by operating activities (12,916) 9,895
Cash flows from financing activities
Proceeds from borrowings (excluding bank overdrafts) 35,720 50
Repayments of borrowings (excluding bank overdrafts) (28,415) -
Proceeds from issue of redeemable shares 2,814 -
Payment on redemption of redeemable shares (2,603) -
Distribution to holders of redeemable shares (2,000) -
Interest paid on borrowings (386) (1,419)
Net cash provided by/(used in) financing activities 5,130 (1,369)
Net (decrease)/increase in cash and cash equivalents (7,786) 8,526
Cash and cash equivalents at the beginning of the financial year (9,816) (18,342)
Cash and cash equivalents at the end of the financial year (17,602) (9,816)
Example: Statement of Cash Flows –Indirect method
An Introduction to IFRS for Investment Funds 15
Applicable IFRS for Investment Funds
© 2014 Deloitte & Touche
IAS 24 – Related party disclosures
Objective : To draw attention to the possibility that an entity’s financial position and
profit or loss may have been affected by the existence of related parties and by
transactions and outstanding balances with such parties
Who Are Related Parties?
• Parties that have the ability to control or to exercise significant influence or joint
control over the other party in making financial and operating decisions.
• Key management of the entity and close family members to any of the above parties
are included in the definition, together with other entities controlled, jointly controlled,
or significantly influenced by these individuals.
A related party to a Fund is…
board of directors investment manager
auditor a minority investor
close family member of key mgmt a significant investor
regulator custodian
?
?
An Introduction to IFRS for Investment Funds 17
© 2014 Deloitte & Touche
Most Significant IFRS Relating to Financial Instruments
IAS 39 Financial
Instruments:
Recognition &
Measurement
IAS 32 Financial
Instruments:
Presentation
IFRS 7 Financial
Instruments:
Disclosure
IFRS 13 Fair Value
Measurement
An Introduction to IFRS for Investment Funds 18
© 2014 Deloitte & Touche
IAS 39 Financial Instruments: Classification
Financial Assets “Available for Sale”
Financial Assets “Loans & Receivables”
Financial Assets “Held to Maturity”
Financial Assets “At Fair Value Through Profit or Loss” (Held for Trading or Designated)
An Instruction to IFRS for Investment Funds 19
© 2014 Deloitte & Touche
Available for sale
(AFS)
Held to maturity
(HTM) At fair value
through profit or
loss
Loans and
receivables
(L&R)
Fair value (IFRS 13)* Amortised cost
(*) Exception: investments in AFS equity instruments that do not have a quoted a market price in an active market and
whose fair value cannot be reliably measured shall be measured at cost (IAS39 AG81)
Fair value
in profit or loss
Fair value
in OCI
Amortization goes to
profit or loss (interests)
Measurement of financial instruments (IAS 39)
Financial Assets
IFRS 13 Fair Value Measurement
© 2014 Deloitte & Touche
Summary of IFRS 13
22 An Introduction to IFRS for Investment Funds
On 12 May 2011 the IASB issued IFRS 13 Fair Value Measurement.
IFRS 13, which is effective from 1 January 2013, defines fair value,
sets out in a single IFRS a framework for measuring fair value and
requires disclosures about fair value measurements. IFRS 13 does
not determine when an asset, a liability or an entity’s own equity
instrument is measured at fair value. Rather, the measurement and
disclosure requirements of IFRS 13 apply when another IFRS
requires or permits the item to be measured at fair value (with limited
exceptions).
The fair value measurement project was part of the Memorandum of
Understanding between the IASB and the FASB. The joint work
resulted in IFRSs and US GAAP having the same definition and
meaning of fair value and the same disclosure requirements about
fair value measurements.
© 2014 Deloitte & Touche
What is the scope of IFRS 13?
Scope of IFRS 13
Applies when another IFRS requires or
permits fair value measurements or
disclosures
Applies to both initial and subsequent
measurement as to how to determine fair
value
Disclosure applies on a recurring and non-
recurring basis, but not on initial
recognition
The scope
of IFRS 13
is
broad.
IFRS 13 does not address
which types of assets,
liabilities and items classified
as an entity’s own
shareholders’ equity should be
measured at fair value
An Introduction to IFRS for Investment Funds 23
© 2014 Deloitte & Touche
Overview of IFRS 13
New IFRS Definition of Fair Value
Fair Value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date
Key Items:
• Exit Price
• Not a forced sale or liquidation
• Market-based view
• Current price
An Instruction to IFRS for Investment Funds 24
© 2014 Deloitte & Touche
Definition of fair value
Fair value is an
EXIT PRICE
In an orderly
transaction
Between market
participants
At measurement
date
Liability
Price that would be
paid to transfer the
liability
Asset
The price that would be
received to sell the
asset
• NOT based on how much the
reporting entity has to pay to
settle a liability
• Should be based on how
much the reporting entity has
to pay to a market participant
such that the market
participant is willing to take
over the liability
An Introduction to IFRS for Investment Funds 25
© 2014 Deloitte & Touche
Overview of IFRS 13
Fair Value Measurement
Valuation techniques and inputs:
• When transactions not directly observable IFRS 13 describes
3 valuation techniques which an entity might use to determine
fair value:-
• The market approach: Using prices generated by market
transactions of comparable assets
• The income approach: Converting future cash flows or
income/expenses to current amounts by discounting
• The cost approach: The amount that would be required
currently to replace the service capacity of an asset
A valuation technique should be selected and consistently
applied to maximise the use of relevant observable inputs
(and minimize unobservable inputs)
An Introduction to IFRS for Investment Funds 26
© 2014 Deloitte & Touche
Overview of IFRS 13
Fair Value Measurement (Continued)
Valuation techniques and inputs (Continued):
• Inputs based on bid and ask prices
• Price within bid-ask spread is most representative of fair
value
• Use of Bid for assets and Ask for liabilities is not
prohibited but not required
• IFRS 13 permits the use of Mid-Market Prices as a
practical expedient
Potential Outcome:
Removal of the bid-ask adjustment from financial statements
An Instruction to IFRS for Investment Funds 27
© 2014 Deloitte & Touche
IFRS 13: Fair Value Measurement - Fair value hierarchy
Level 1
Quoted prices in active market for identical assets
or liabilities
Level 2 Observable inputs other than quoted prices in level 1, either directly or
indirectly
Level 3
Unobservable inputs
• The fair value hierarchy is
applicable to both financial and
non-financial items that are within
the scope of IFRS 13
• The fair value hierarchy gives the
highest priority to quoted prices in
active markets for identical assets
and liabilities and the lowest
priority to unobservable inputs
• The fair value measurement is
categorised in its entirety based
on the lowest level of significant
input
• Fair value hierarchy depends on
the inputs, not valuation
techniques.
© 2014 Deloitte & Touche
Overview of IFRS 13
Fair Value Disclosures
Level 3 Fair Value Measurements
• Quantitative disclosure of the unobservable inputs and
assumptions used
• Description of the valuation process in place
• Discussion of the sensitivity of the fair value to changes in
unobservable inputs and inter-relationships between those inputs
that magnify or mitigate the effect on measurement
An Introduction to IFRS for Investment Funds 29
© 2014 Deloitte & Touche
IFRS 7 - Financial Instruments: Disclosures
IFRS 7 deals exclusively with the disclosure of financial instruments in 2 broad
categories:
Information about the significance of financial instruments
• Categories of financial assets and financial liabilities;
• Reclassifications between categories;
• Derecognition;
• Collateral granted or received
• Items of income, expense, gains or losses
• Accounting policies
• Fair value disclosure and hierarchy (replaced by IFRS 13 effective January 1, 2013)
Information about the nature and extent of risks arising from financial instruments
• Qualitative and quantitative disclosures on each type of risk: credit, market, liquidity
An Introduction to IFRS for Investment Funds 30
© 2014 Deloitte & Touche
IFRS 7 - Financial Instruments: Disclosures
Liquidity risk
Credit risk
Market risk
• Risk that the entity is unable to meet its financial obligations
• An entity must disclose:
− a maturity analysis
− a description of how it manages the risk
• Risk that the counterparty to a financial instrument will cause a loss to the
entity by not meeting its obligations
• An entity must disclose:
− Maximum exposure to credit risk
− A description of the collateral received
− Information about the credit quality of the financial instruments
− The carrying amount of financial assets that are past due or impaired
• Risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices. Market risk comprises three
types of risk: currency risk, interest rate risk and other price risk
• An entity must disclose:
− Sensitivity analysis for each type of market risk or value-at-risk
− Methods and assumptions used for such analysis
− Changes from previous periods in methods and assumptions
An Introduction to IFRS for Investment Funds 31
Offsetting
© 2014 Deloitte & Touche
IFRS - Offsetting
© 2013 Deloitte & Touche 3
3
• Amendments to IAS 32
• Amendments to IFRS 7
• The above standards were issued as
part of a joint offsetting project.
• Effective for fiscal periods beginning on
or after 1 January 2013.
An Introduction to IFRS for Investment Funds 33
© 2014 Deloitte & Touche
IAS 32 Financial Instruments: Presentation Offset application guidance
• “currently has a legally enforceable right to set off”
‒ Not contingent on a future event
‒ Legally enforceable in:
• normal course of business;
• event of default; and
• event of bankruptcy/insolvency
‒ Enforceable by entity and all counterparties
• “intends either to settle on a net basis or to realise the asset an settle the liability
simultaneously”
‒ gross settlement mechanism has features that eliminate or result in insignificant credit
and liquidity risk
‒ processes receivables and payables in a single settlement process or cycle
An Introduction to IFRS for Investment Funds 34
© 2014 Deloitte & Touche
IFRS 7 Financial Instruments: Disclosures Offset Disclosures
Scope: “all recognised financial instruments that are subject to an enforceable master
netting arrangement or similar agreement”
Disclosures to show separately for financial assets and liabilities:
(a) Gross amounts of recognised financial assets and recognised financial
liabilities;
(b) Amounts set off in accordance IAS 32 (paragraph 42)
(c) Net amount presented in balance sheet
(d) Amounts subject to master netting (or similar) arrangement but not offset
(e) Net amount
Effective date: retrospective application for “annual periods beginning on or after 1
January 2013 and interim periods within those annual periods”
An Introduction to IFRS for Investment Funds 35
© 2014 Deloitte & Touche
• Required disclosures
about rights of offset
and related
arrangements (such as
collateral posting
requirements) for
financial instruments
under an enforceable
master netting
agreement or similar
arrangement
Offsetting Financial Assets and Financial Liabilities
36 An Introduction to IFRS for Investment Funds
Investment Entities (Amendments to IFRS 10, IFRS 12, IAS 27)
© 2014 Deloitte & Touche
Fundamental principle
• Consolidation is based on control
• IAS 27: control is the power to
govern the financial and
operating policies of an entity so
as to obtain benefits
• SIC 12: in an SPE, exposure to
the majority of risks and rewards
may be the determining factor in
establishing control
• Consolidation is based on control
• Control may be obtained in
various manners, and not solely
as a result of the power to direct
the financial and operating
policies
• Exposure to risks/rewards is one
of the factors necessary to the
existence of control, but it is
never the determining factor
IAS 27/SIC 12 IFRS 10
IFRS 10 requires extensive use of judgment
(IFRS 12 requires disclosure of areas of judgment)
© 2014 Deloitte & Touche
IFRS 10 Consolidated Financial Statements
39 An Instruction to IFRS for Investment Funds
Ability to use
power to affect
returns
Power over
the investee
Exposure, or
rights, to
variable
returns
Assessment of control is based on all facts and circumstances
Conclusion is reassessed if there is an indication of changes in those elements
A single consolidation model based on control,
irrespective of the nature of the investee
IFRS 10 deals with what you consolidate, not how
© 2014 Deloitte & Touche
IFRS 10 Consolidated Financial Statements
• Arises from substantive rights to direct relevant
activities
• Requires identification of relevant activities and how
decisions related to these activties are takendetails]
Power
• Broad defintion
• Any return that has the potential to vary as a result of
the investee‘s performance
Variable returns
• Assessment of whether a decision-maker is acting as
an agent or a principal details]
Ability to affect return
through power
Definition of control
Control is
• having exposure (rights) to variable returns from
involvement with the investee and
• having the practical ability to affect those returns
• through one‘s power over the investees]
© 2014 Deloitte & Touche
Determination of whether control exists
Power = Substantive rights to direct relevant activities Exposure (rights) to
variable returns
What are the variable returns from
the investee?
Rights that are solely protective do not provide power and do not prevent another investor from having
the power
Ability of the investor to affect its returns through its power – professional judgment critical
Potential to vary as a result of the
investee’s performance
Broad definition
1. What are the relevant activities?
2. How are decisions over these relevant activities taken?
Votes Other
> 50% < 50%
Contractual rights
Practical ability
Special relationships
Significance of exposure
to variable returns
Rights of
minority
shareholders
De facto control
Potential voting
rights
Other
contractual
rights
An Introduction to IFRS for Investment Funds 41
© 2014 Deloitte & Touche
Exemption for Investment Entities
Where an entity qualifies as an investment entity it does not consolidate its
subsidiaries but measures its investments at fair value
An investment entity shall be required to measure
subsidiaries at FVTPL
A parent shall determine whether it is an investment entity.
An investment entity is an entity that:
(a) obtains funds from one or more investors for the purpose
of providing those investor(s) with investment management
services;
(b) commits to its investor(s) that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income, or both; and
(c) measures and evaluates the performance of substantially all
of its investments on a fair value basis.
© 2014 Deloitte & Touche
Investment
Entity
Investment entities
Definition Commits that its business
purpose is
to invest funds for returns
from either capital
appreciation and/or
investment income
Measures and evaluates
substantially all of its
investments on a fair value
basis
Obtains funds from one or
more investors
to provide investment
management services
More than
one
investments
More than
one
investors
Ownership
interest in the
form of equity
Investors that
are not related
to the entity
Typical
Characteristics:
Expected, but
not required
© 2014 Deloitte & Touche
Parents of investment entities
Investment entity parent Non-investment entity parent
An Instruction to IFRS for Investment Funds 44
© 2014 Deloitte & Touche
Other requirements
Additional disclosures in IFRS 12 Disclosure of Interests in Other Entities
Additional disclosures and separate financial statement requirements in IAS 27
Separate Financial Statements
Retrospective application with limited transition reliefs (e.g. comparative relief)
Effective date 1 January 2014; early application permitted
An Introduction to IFRS for Investment Funds 45
© 2014 Deloitte & Touche
IFRS 12 Disclosure Requirements
• Any investment entity that is to apply the exemption shall disclose the fact that they have availed of such exemption
Significant Judgements & Assumptions
• Nature of its interest in another entity/arrangement
• Type of Joint arrangement
• Does it meet the definition of an Investment Entity?
Application
An Introduction to IFRS for Investment Funds 46
© 2014 Deloitte & Touche
IFRS 12 Disclosure Requirements
Interests In Unconsolidated
Subsidiaries
• Subsidiary’s name
• the principal place of business (and country of incorporation if different from the principal place of business) of the subsidiary;
• the proportion of ownership interest held by the investment entity and, if different, the proportion of voting rights held.
• Any significant restrictions on use of assets
• Any commitments/intentions to provide financial or other support to an unconsolidated subsidiary
An Introduction to IFRS for Investment Funds 47
IFRS 9 “Financial Instruments”
© 2014 Deloitte & Touche
IFRS 9
• Most recent version of standard published Oct 2010
• ED proposing limited amendments published Nov 2012
• Amended standard in July 2014
Classification & Measurement
• Most recent ED published March 2013
• Final standard issued in July 2014 Impairment
• Published as final in November 2013 General Hedge
Accounting
49 An Introduction to IFRS for Investment Funds
Current status and timetable
Effective date set as 1 Jan 2018.
© 2014 Deloitte & Touche
IFRS 9 – Classification and Measurement
50 An Introduction to IFRS for Investment Funds
Classification of financial assets
Reclassifications are required if change in business model
© 2014 Deloitte & Touche
IFRS 9 – Classification and Measurement New category for debt instruments - FVTOCI
A gain or loss on a debt instrument measured at FVTOCI is recognised in other
comprehensive income except for:
Gains and losses recognised in other comprehensive income reclassified to
profit or loss on derecognition of the financial asset.
Foreign exchange gains and
losses Interest
calculated using effective interest rate
method
Impairment losses
An Introduction to IFRS for Investment Funds 51
© 2014 Deloitte & Touche
IFRS 9 – Classification and Measurement Classification of financial liabilities – own credit
Classification of financial liabilities consistent with IAS 39
For liabilities designated as at FVTPL, IFRS 9(2010) requires that:
• The amount of change in the fair value of the financial liability that is attributable to
changes in the credit risk of that liability shall be presented in other
comprehensive; and
• the remaining amount of change in the fair value of the liability shall be presented
in profit or loss
unless the treatment of the effects of changes in the liability’s credit risk described in (a)
would create or enlarge an accounting mismatch in profit or loss.
If so an entity shall present all gains or losses on that liability (including the effects of
changes in the credit risk of that liability) in profit or loss.
IFRS 9(2013) permits the application of these requirements without the application of the other requirements of IFRS 9
An Introduction to IFRS for Investment Funds 52
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