Cash Received via Electronic Transfer as Settlement for a Financial Asset (IFRS 9)

Date recorded:


In its September 2021 meeting, the Committee discussed a submission about the recognition of cash received via Bacs, a formal automated settlement process that takes a three working-day cycle to settle a cash transfer, as settlement for a financial asset. In the fact pattern described, an entity sells goods to a customer and recognises a trade receivable of CU100 on Day 1. The customer notifies the entity that it has initiated a payment of CU100 via Bacs to settle the trade receivable on Day 2. The entity receives CU100 into its bank account on Day 3. The submitter asked whether it is acceptable for the entity to derecognise the trade receivable and recognise the cash on Day 2, rather than on the date the cash is settled (i.e. Day 3). The Committee concluded that the entity derecognises the trade receivable on the date on which its contractual rights to the cash flows from the trade receivable expire and recognises cash (or other financial asset) received as settlement on the same date.

27 comment letters were received. Almost all respondents agreed with the Committee's analysis and conclusions in the tentative agenda decision. Nonetheless, many respondents commented on the outcomes of finalising the agenda decision and suggested not to finalise the agenda decision. A few respondents disagreed with the Committee’s conclusions in the tentative agenda decision.

Staff recommendation

The staff recommended finalising the agenda decision with minor editorial changes and at same time, reporting to the IASB the respondents' concerns about the outcome of finalising the agenda decision.

Committee discussion

The Committee members generally agreed with the technical conclusion on the derecognition criteria of the trade receivables. One Committee member reminded the other members that the tentative agenda decision should be carefully worded in describing the "in transit" financial asset because an entity would need to apply judgement to determine the contractual right to draw cash depending on different facts and circumstances.

The discussion mainly focused on the concerns with respect to finalization of the agenda decision. A number of Committee members did not agree that other similar questions (payments on liability and payment received by credit card) raised in the comment letters could be ignored. They thought that the agenda decision is complex and time-consuming to implement. Publishing the agenda decision as drafted may create a bigger issue than not publishing it because it may have an unintended broader application. They recommended that the Committee should report these concerns to the IASB and think of a more realistic solution for the broader issue (i.e. what is "cash") and the implications for different banking systems. A Committee member suggested adding a project on the definition of ‘cash’ to the standard-setting agenda. The staff said this will be suggested to the IASB but reminded the Committee members that such project could take years to complete.

Some Committee members found the conclusion in the agenda decision obvious for the fact pattern submitted and the agenda decision should therefore only focus on that fact pattern. The concerns raised should not prevent the finalisation of the agenda decision. For other considerations, the Committee should wait until the questions were asked in further submissions. Some of these Committee members were concerned that the consistency of the application could not be achieved in the short run and were concerned about whether sufficient time is allowed for entities to implement the change in accounting policy and establish the correct bank balances. They suggested the Committee should give transition relief for entities that are not able to apply the agenda decision within a short period of time. However, the staff said that sufficient time is always allowed for each agenda decision to be implemented.

Committee decision

The Committee, by a vote of 11 out of 14, decided not to add the matter to its standard-setting agenda but to publish the agenda decision.

13 out of 14 Committee members agreed with the amendments to the drafting of the agenda decision. At the same time, the concerns raised in the comment letters and by Committee members will be reported to the IASB for its consideration of what the next step should be.

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