Accounting for Pledged Securities under IFRS

[SimonC]

A asset has listed shares pledged as collateral. Does this need to recognised in the P&L or B/S or is all that is needed is a note in the Financial Statements? If so what needs to be disclosed?

[kamranACA]

Dear,

There is no requirement to recognise such arrangements in P/L or B/S currently. This had, however, remained under discussion for some time and eventually ignored.

Being an off balance sheet item its disclosure would be required under IFRS 8. I suggest you read the full text of IFRS 8 for more clarity. However, I paste hereunder the paragraphs 14 and 15 of this IFRS for your general understanding.

QUOTE

Collateral

14. An entity shall disclose

(a) the carrying amount of financial assets it has pledged as collateral for liabilities or contingent liabilities, including amounts that have been reclassified in accordance with paragraph 37(a) of IAS 39; and

(b) the terms and conditions relating to its pledge.


15. When an entity holds collateral (of financial or non-financial assets) and is permitted to sell or re-pledge the collateral in the absence of default by the owner of the collateral, it shall disclose

(a) the fair value of the collateral held;

(b) the fair value of any such collateral sold or re-pledged, and whether the entity has an obligation to return it; and

(c) the terms and conditions associated with its use of the collateral.


UNQUOTE


I hope this will be beneficial for understanding the issue. If you want some more focused reply, please let me know.


Regards,



KAMRAN.

[SimonC]

Kamran,

Thanks for your reply, it was very helpful.

Many thanks,

Kenny

[kamranACA]

Kenny,

Mention not please.

Regards,


KAMRAN.

[dreamsunlimited]

I guess the requirement is of IFRS 7 not 8. Correct me, if I'm wrong....


Regards,

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by kamranACA</i>
<br />Dear,

There is no requirement to recognise such arrangements in P/L or B/S currently. This had, however, remained under discussion for some time and eventually ignored.

Being an off balance sheet item its disclosure would be required under IFRS 8. I suggest you read the full text of IFRS 8 for more clarity. However, I paste hereunder the paragraphs 14 and 15 of this IFRS for your general understanding.

QUOTE

Collateral

14. An entity shall disclose

(a) the carrying amount of financial assets it has pledged as collateral for liabilities or contingent liabilities, including amounts that have been reclassified in accordance with paragraph 37(a) of IAS 39; and

(b) the terms and conditions relating to its pledge.


15. When an entity holds collateral (of financial or non-financial assets) and is permitted to sell or re-pledge the collateral in the absence of default by the owner of the collateral, it shall disclose

(a) the fair value of the collateral held;

(b) the fair value of any such collateral sold or re-pledged, and whether the entity has an obligation to return it; and

(c) the terms and conditions associated with its use of the collateral.


UNQUOTE


I hope this will be beneficial for understanding the issue. If you want some more focused reply, please let me know.


Regards,



KAMRAN.

<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

[kamranACA]

Dear,

Thank you for correcting. Yes, it's IFRS 7.

It was written errorneously as 8 instead of 7. IFRS 8 is about segment information.


Regards,


KAMRAN.