Held to maturity assets

[robcooper_1]

Hi,

Does anyone know whether assets that are classified as Held to Maturity need to fair valued for disclosure purposes?

I know these are kept at cost on the balance sheet, but is there a requirement to note that these are worth "X" under fair value and this is kept as a note?

Thanks

[lallykejan]

Held-to-maturity investments are measured at amortised cost. i dnot think you have to disclose there fair value

[danishayub_76]

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments that an entity intends and is able to hold to maturity and that do not meet the definition of loans and receivables and are not designated on initial recognition as assets at fair value through profit or loss or as available for sale. Held-to-maturity investments are measured at amortised cost. If an entity sells a held-to-maturity investment other than in insignificant amounts or as a consequence of a non-recurring, isolated event beyond its control that could not be reasonably anticipated, all of its other held-to-maturity investments must be reclassified as available-for-sale for the current and next two financial reporting years. [IAS 39.9] Held-to-maturity investments are measured at amortised cost. [IAS 39.46(b)]

[Dard]

Danish, if that question was asked in an exam, you would have gotten very low marks as you have not answered the question. The question asks whether the FAIR value of the financial assets needs to be disclosed at each year end when they are measured at amortised cost.
The fair value is not needed to be disclosed as the entity tests the financial assets for impairement annualy.
In the notes all the details as to how impairement was charged is disclosed, including the selling price(normally the fair value) less costs to sell.

[Ali Akbar]

Hi,

In my view, fair value needs to be disclosed in line with requirement of IFRS 7.25 even if the financial asset is measured at amortised cost. If the fair value is not measurable, that fact should be disclosed.

[kamranACA]

……..(Ali Akbar; welcome back buddy. Your presence will be a source of healthy discussion and guidance for the students and members. Congrats for your qualification.)………..


There is a full section of guidelines regarding the disclosure of Fair Values of financial assets and financial liabilities in IFRS-7. For detail, please check paragraphs 25 to 30.

Paragraph 25 of IFRS says- “Except as set out in paragraph 29, for each class of financial assets and financial liabilities, an entity shall disclose the fair value of that class of assets and liabilities in a way that permits it to be compared with its carrying amount.”

Further, paragraph 29 provides exemption from disclosing the fair value only in following cases-

(a) when the carrying amount is a reasonable approximation of fair value, for example, for financial instruments such as short-term trade receivables and payables;

(b) for an investment in equity instruments that do not have a quoted market price in an active market, or derivatives linked to such equity instruments, that is measured at cost in accordance with IAS 39 because its fair value cannot be measured reliably; or

(c) for a contract containing a discretionary participation feature (as described in IFRS 4) if the fair value of that feature cannot be measured reliably.

Regards,

[Ali Akbar]

Thank you Kamran for the welcome )

I agree with your text, but I think clause b of para 29 is now no more in place. It was deleted in the recent revision of IFRS 7.

[kamranACA]

The edition with me perhaps is not that updated. What I remember is, it is in consonance of Paragraph 46 (c) of IAS-39 as well.

Regards,

[imdad1]

Agreed with Kamran bhai..i cross checked Para 25 of IFRS 7 and also para 29 of the same..as per my understanding if fair value can be measured it should be disclosed...
here my question is if it is really the requiremene of IFRS than y practically neighter we disclose its fairvalue nor do we disclose the fact that the fair value cannnot be measure ???

[Ali Akbar]

Paragraphs 10-57 of IAS 39 are deleted as well and as part of IFRS improvement project (phase 1 for IAS 39) the deleted portion of IAS 39 is now in the 'refined' form of IFRS 9. Rest of the portion of IAS 39 will be transferred as part of phase 2 and phase 3.


As you know, overall direction of improvement projects is towards 'fair value' approach (specifically for financial instruments), accordingly the overall tone of both IFRS 9 and IFRS 7 is to measure (except those carried at amortized cost) and disclose all financial assets at fair value. Therefore, the para of old IAS 39 and previous IFRS 7 (29 b) which stated exception for determination of fair value of private equity investments (usually classified as held for sale) is now deleted. Both IFRSs then discuss different valuation techniques that an entity should use to measure fair value (both for measurement and disclosure) even if the fair value is not directly observable from market (e.g in the case of investment in private company's equity-the earlier exception).

[Ali Akbar]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by imdad1</i>
<br />Agreed with Kamran bhai..i cross checked Para 25 of IFRS 7 and also para 29 of the same..as per my understanding if fair value can be measured it should be disclosed...
here my question is if it is really the requiremene of IFRS than y practically neighter we disclose its fairvalue nor do we disclose the fact that the fair value cannnot be measure ???
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

I think fair values are disclosed for financial assets carried at amortized cost in financial statements that I have gone through of different groups or atleast I have also seen disclosure like 'fair value approximates to carrying amount'.

Can you quote any listed company's latest financial statements where such disclosure is not given?

[imdad1]

well sir i am currently in BIg four dubai...here still people dont follow this practice..i know pakistan financial reporting practices are much better than uae!

[kamranACA]

@Ali Akbar

IFRS 9 is effective for annual periods beginning on or after 01 January 2013.

It has superseded IAS 39 mainly by requiring that all equity investments are to be measured at fair value and eliminating the cost model for unquoted equity investments.

Regards,

[Ali Akbar]

Yes you are right regarding compliance date! However, early application voluntarily is allowed as always. I was looking at soft copies available at IASB website.

Anyhow, the crux of discussion is that fair value of held to maturity investments has to be disclosed.

[kamranACA]

Yes, deleted a few lines because sometimes the discussion takes a new direction without an effort at the part of the writers.

Anyway, thanks for the confirmation.

Regards,