IASB December 2008
The Board continued its discussion of the two approaches to derecognition that the staff presented at the joint meeting with the US Financial Accounting Standards Board (FASB) in October. The Board made the following tentative decisions:
- For Approach 1, to focus solely on whether, after the transfer, the transferor has access to all or some of the cash flows of the financial asset that the transferor recognised before the transfer.
- For Approach 2, to continue to include economic constraints (including some options allowing the transferee to put a transferred asset back to the transferor) in the assessment of whether a transferee has the practical ability to transfer to a third party for its own benefit the financial asset that it purchased from the transferor.
The Board also tentatively adopted the following derecognition principle for financial liabilities:
“An entity should derecognise a financial liability or component thereof when it no longer qualifies as a liability of the entity (ie when the present obligation is eliminated and the entity is no longer required to transfer economic resources in respect of that obligation).”
The Board also discussed secured borrowings with or without recourse, security lending arrangements and repurchase agreements (repos). For secured borrowings with recourse and security lending arrangements and repos, the Board made the following tentative decisions:
- Secured borrowings with recourse and securing assets should be accounted for similarly to unsecured borrowings and unpledged assets.
- Any restrictions on a debtor’s ability to benefit from the securing asset should be addressed by disclosure.
- Security lending arrangements and repos involving readily obtainable financial assets should qualify for derecognition.
The Board made no tentative decisions on the accounting for secured borrowings without recourse and the related securing assets.
The Board will continue its discussion at its meeting in January and expects to publish an exposure draft in March or April 2009.
Location: London UK
Date: 18/12/2008
Observer Notes