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Transition and Initial Recognition of Financial Assets and Financial Liabilities

Date recorded:

In July 2004, the IASB published an Exposure Draft of Proposed Amendments to IAS 39 Financial Instruments: Recognition and Measurement - 'Transition and Initial Recognition of Financial Assets and Financial Liabilities'. The ED proposed permitting prospective application of the 'day 1' gain or loss recognition requirements in paragraph AG761 for transactions entered into after 25 October 2002. The comment period closed on 8 October and 35 comment letters were received.

In considering the comments received, the Board underscored its intentions when developing this ED, which was the elimination of the reconciling item between IFRS and US GAAP. After discussing the requests for relief in applying this guidance, the Board agreed to make the effective date 1 January 2004 with an option to select 25 October 2002 for those preparers that wanted to align with US GAAP as well as a further option to retrospectively apply the requirements of 'day 1' profit recognition.

The Board agreed that re-exposure of this decision was not necessary and there was no indication by members to dissent on the issuance of the pronouncement.