IAS 39 — Impairment of financial assets reclassified from available-for-sale to loans and receivables
The Committee considered a request for additional guidance on how an entity should account for the impairment of financial assets with a fixed maturity after they have been reclassified from the available-for-sale (AFS) category to loans and receivables (IAS 39 Financial Instruments: Recognition and Measurement, paragraphs 50E, 50F and 54(a)).
Although the staff presented alternate views, the Committee agreed (with one exception) that the only tenable view was that:
- the effective rate of interest is the rate that discounts the estimated future cash flows through the remaining life of the asset to the new carrying amount of the financial asset when it is reclassified (new effective rate of interest).
- when recognising an impairment loss, all related OCI is reclassified from OCI to profit and loss.
- after an impairment is recognised, the carrying amount of the financial asset is adjusted to be measured at the present value of estimated future cash flows, discounted at the new effective rate of interest.
The Committee agreed that the issue should not be added to the Agenda. The Agenda Decision would give a clear indication of the guidance in IAS 39, acknowledge that there might have been some divergence in practice historically, but that the Committee does not expect this to continue given the clear guidance identified.
