Chapter 48

Financial Instruments: Recognition and Initial Measurement

1 Introduction

2 Recognition

2.1 General requirements

2.1.1 Receivables and payables

2.1.2 Firm commitments

2.1.3 Forward contracts

2.1.4 Option contracts

2.1.5 Planned future transactions

2.1.6 Treatment by transferee of transfers of financial assets not qualifying for derecognition by transferor

2.2 ‘Regular way’ transactions

2.2.1 Trade date accounting

2.2.2 Settlement date accounting

2.2.2.A Current market practice – ‘due date’ accounting

2.2.3 Illustrative examples

2.2.3.A Exchanges of non-cash financial assets

3 Initial Measurement

3.1 General requirements

3.2 Initial fair value

3.2.1 Interest-free and low-interest loans

3.2.2 Short-term receivables and payables

3.2.3 Equity instruments reclassified as liabilities following modification of contractual terms

3.2.4 Financial guarantee contracts and off-market loan commitments

3.2.5 ‘Day 1’ profits

3.2.6 Loans and receivables acquired in a business combination

3.3 Transaction costs

3.4 Bid-ask spreads

3.5 Embedded derivatives and financial instrument hosts

3.6 Regular way transactions

3.7 Assets and liabilities arising from loan commitments

4 Effective Dates and Transitional Provisions

List of examples

Example 48.1: Trade date and settlement date accounting – regular way purchase

Example 48.2: Trade date and settlement date accounting – regular way sale

Example 48.3: Trade date and settlement date accounting – exchange of non-cash financial assets

Example ...

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