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International GAAP 2012: Generally Accepted Accounting Practice under International Financial Reporting Standards by Ernst & Young

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Chapter 50

Financial instruments: Derecognition

1 Introduction

1.1 Off-balance sheet finance

2 Development of IFRS

2.1 Definitions

3 Derecognition – Financial Assets

3.1 Background

3.2 Decision tree

3.2.1 Importance of applying tests in sequence

3.3 Derecognition principles, parts of assets and groups of assets

3.3.1 Credit enhancement through transferor’s waiver of right to future cash flows

3.3.2 Derecognition of groups of financial assets

3.3.2.A The IASB’s view and the Interpretations Committee’s tentative conclusions

3.3.2.B What are ‘similar assets’?

3.3.3 Transfer of asset (or part of asset) for only part of its life

3.3.4 ‘Financial asset’ includes whole or part of a financial asset

3.4 Have the contractual rights to cash flows from the asset expired?

3.4.1 Renegotiation of an asset’s terms

3.5 Has the entity ‘transferred’ the asset?

3.5.1 Transfers of contractual rights to receive cash flows

3.5.1.A Meaning of ‘transfers the contractual rights to receive the cash flows’

3.5.1.B Transfers subject to conditions

3.5.2 Retention of rights to receive cash flows subject to obligation to pay over to others (pass-through arrangement)

3.6 Securitisations

3.6.1 Recourse to originator

3.6.2 Short-term loan facilities

3.6.3 Insurance protection

3.6.4 Treatment of collection proceeds

3.6.5 Transfer of a group of assets not all of which are derecognised

3.6.6 ‘Empty’ subsidiaries or SPEs

3.7 Client money

3.8 Has the entity transferred or retained substantially all the risks and rewards ...

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