Extinguishment: Difference between revisions
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Under paragraph 3.3.2 of IFRS 9 the following changes are accounted for as an extinguishment of the original financial liability: | Under paragraph 3.3.2 of IFRS 9 the following changes are accounted for as an extinguishment of the original financial liability: | ||
:(1) An exchange between an existing borrower and lender of debt instruments | :(1) An exchange between an existing borrower and lender of debt instruments with substantially different terms; or | ||
with substantially different terms; or | |||
:(2) A substantial modification of the terms of an existing financial liability or a part of it. | :(2) A substantial modification of the terms of an existing financial liability or a part of it. | ||
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* [[Derivative instrument]] | * [[Derivative instrument]] | ||
* [[Fair Value Adjustment]] | * [[Fair Value Adjustment]] | ||
* [[Financial asset]] | |||
* [[Financial instrument]] | * [[Financial instrument]] | ||
* [[Financial liability]] | |||
* [[Hedge accounting]] | * [[Hedge accounting]] | ||
* [[IAS 32]] | * [[IAS 32]] | ||
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* [[IFRS 15]] | * [[IFRS 15]] | ||
* [[Impairment]] | * [[Impairment]] | ||
* [[International Financial Reporting Standards]] (IFRS) | |||
* [[Modification]] | * [[Modification]] | ||
* [[Modification gain or loss]] | * [[Modification gain or loss]] |
Latest revision as of 21:34, 30 October 2024
1. Financial reporting - financial liabilities - International Financial Reporting Standards (IFRS) - IFRS 9.
Under IFRS 9 the extinguishment of a financial liability means that the obligation is discharged, cancelled or has expired.
Under paragraph 3.3.2 of IFRS 9 the following changes are accounted for as an extinguishment of the original financial liability:
- (1) An exchange between an existing borrower and lender of debt instruments with substantially different terms; or
- (2) A substantial modification of the terms of an existing financial liability or a part of it.
Under paragraph 3.3.3 of IFRS 9, the difference between the carrying amount of a financial liability (or part of a financial liability) extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
This difference may be a modification gain or loss.
- Accounting and tax surprises under IFRS 9
- "Corporate borrowers often need to renegotiate their existing loan liabilities, and in many companies this responsibility will fall on the treasurer.
- Although treasurers may not necessarily be accounting experts, they still need to carefully consider the potential accounting impacts when renegotiating loan terms.
- Under IFRS 9: Financial Instruments, loan modifications can trigger gains and losses for financial reporting purposes and may even have tax implications."
- Renegotiating a loan? Get the accounting right - Kern Roberts, managing director, global accounting practice lead Chatham Financial.
2. Set-off.
A situation in which a claim or demand is set against an opposite claim or demand, reducing or eliminating the first demand.
See also
- Derecognition
- Derivative instrument
- Fair Value Adjustment
- Financial asset
- Financial instrument
- Financial liability
- Hedge accounting
- IAS 32
- IAS 39
- IFRS 9
- IFRS 9 hedge accounting reforms: a closer reflection of risk management?
- IFRS 15
- Impairment
- International Financial Reporting Standards (IFRS)
- Modification
- Modification gain or loss
- Non-substantial modification
- Recognition
- Set-off
- Substantial modification