1
Q
What is a Financial instrument?
A
IAS32_11 durch Verweis von #IFRS9_A und #IAS39_8
- contract that gives a financial asset of one entity and a financial liability or an equity instrument of another entity
2
Q
What is a financial Liability?
A
Var.1
#IAS32_11 durch Verweis von #IFRS9_A und #IAS39_8
- contractual obligations to deliver cash or another financial Asset; Contractual obligations to exchange financial assets under conditions that are potentially unfavourable
Var.2
- Contract that will or may be settled in the entity’s own equity instruments and is defined as
- financial liability if
- the issuer has contractual obligations to deliver a variable number of its own equity instruments
- derivative if
- there is no exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity instruments
3
Q
What is a financial Asset?
A
IAS32_11 durch Verweis von #IFRS9_A und #IAS39_8
- cash; contractual rights to cash (e.g. loan) in potentially favourable conditions, contractual rights to exchange cash (Swaps), Equity instruments of another entity
4
Q
What are equity Instruments?
A
IAS32_11 durch Verweis von #IFRS9_A und #IAS39_8
contract that evidences residual interest in assets of entity after deducting all of its liabilities
- Equity
- Residual interest in the assets of the entity after deducting all its liabilities ( #IAS_32_11, #F_49c)
- If there is no debt (and both conditions #IAS32_16a and #IAS32_16b are met)
- Important assessment practicalities
- Test of repayment obligation of the instrument or early termination rights for investor or issuer
- Test of ongoing payments
- Different results possible split accounting
5
Q
What is a financial derivative?
A
IFRS9_A
- Value marked to changes in specific underlying
- interest rate, financial instrument, commodity, FX, indices, credit rates etc.
- Settlement at future date
- Insignificant / substantially reduced inital net investment compared with underlying
6
Q
What are some examples for financial instruments?
A
- stocks
- exchange-traded funds (ETFs)
- bonds
- derivatives contracts (such as options, futures, and swaps)
- checks
- certificates of deposit (CDs)
- bank deposits
- loans
7
Q
What are example for equity instruments?
A
- Common and preferred stock
- ETF
- Equity Options
- Equity Swaps
8
Q
What three typical derivatives categories are there?
A
- Termingeschäfte -> Futures(standardvertrag)/Forwards(indiv.Vertrag)
- Option -> europäisch(Fixpunkt)/amerikanisch(Laufzeit)
- Swap
9
Q
What are examples for Swaps?
A
Interest rate swap: forward contract in which one stream of future interest payments is exchanged for another based on a specified principal amount.
Example
PepsiCo needs to raise $75 million to acquire a competitor. In the United States, they may be able to borrow the money with a 3.5% interest rate, but outside of the U.S., they may be able to borrow at just 3.2%. The catch is that they would need to issue the bond in a foreign currency, which is subject to fluctuation based on the home country’s interest rates.
PepsiCo could enter into an interest rate swap for the duration of the bond. Under the terms of the agreement, PepsiCo would pay the counterparty a 3.2% interest rate over the life of the bond. The company would then swap $75 million for the agreed-upon exchange rate when the bond matures and avoid any exposure to exchange-rate fluctuations.
10
Q
What is an example for a Call Option derivative?
A
Call Option Example
A potential homeowner sees a new development going up. That person may want the right to purchase a home in the future but will only want to exercise that right after certain developments around the area are built.
The potential homebuyer would benefit from the option of buying or not. Imagine they can buy a call option from the developer to buy the home at say $400,000 at any point in the next three years. Well, they can—you know it as a non-refundable deposit. Naturally, the developer wouldn’t grant such an option for free. The potential homebuyer needs to contribute a down payment to lock in that right.
With respect to an option, this cost is known as the premium. It is the price of the option contract. In our home example, the deposit might be $20,000 that the buyer pays the developer. Let’s say two years have passed, and now the developments are built and zoning has been approved. The homebuyer exercises the option and buys the home for $400,000 because that is the contract purchased.
The market value of that home may have doubled to $800,000. But because the down payment locked in a predetermined price, the buyer pays $400,000. Now, in an alternate scenario, say the zoning approval doesn’t come through until year four. This is one year past the expiration of this option. Now the homebuyer must pay the market price because the contract has expired. In either case, the developer keeps the original $20,000 collected.
11
Q
What is an example for a put option derivative?
A
If an investor wants insurance on their S&P 500 index portfolio, they can purchase put options. An investor may fear that a bear market is near and may be unwilling to lose more than 10% of their long position in the S&P 500 index. If the S&P 500 is currently trading at $2,500, they can purchase a put option giving them the right to sell the index at $2,250, for example, at any point in the next two years.
If in six months the market crashes by 20% (500 points on the index), they have made 250 points by being able to sell the index at $2,250 when it is trading at $2,000—a combined loss of just 10%. In fact, even if the market drops to zero, the loss would only be 10% if this put option is held. Again, purchasing the option will carry a cost (the premium), and if the market doesn’t drop during that period, the maximum loss on the option is just the premium spent.
12
Q
What is a financial guarantee contract?
A
IFRS9_A
- Contract
- issuer to make specific payments to reimburse holder
- for incurred loss
- bc. debtor defaults
13
Q
What are Irrevocable Loan Commitments and how are they regulated?
A
- IFRS includes only if:
- designated as Financial liabilities at FVtPL #IFRS9_2_3a
- politisch, praktisch irrelevant
- settled net in cash or issuing another financial instrument #IFRS9_2_3b
- interest rate below market rate #IFRS9_3_2_c
- past practise of selling assets shortly after origination #IFRS9_3_2a
- Zweckgesellschaft die Kreditfolio aufkauft: Geht an Börse und emittiert WP
- Transfer Kreditrisiko und Ausfallrisiko
- Zweckgesellschaft die Kreditfolio aufkauft: Geht an Börse und emittiert WP
- designated as Financial liabilities at FVtPL #IFRS9_2_3a
- Fair Value influencing profit and loss
- Other loan commitments
- IAS38 –> #IFRS9_2_1g
- usually no “onerous contract”
14
Q
What are financial Guarantees and how are they regulated?
A
IFRS9_A
- Contract
- issuer to make specific payments to reimburse holder
- for incurred loss
- bc. debtor defaults
- check contract itself –> is payment bc. of default only or also bc of other changes
- Valuation:
- Initial: FV minus premium of guarantee
- subsequently higher of
- initially recognized amount
- impairment
- difference to Credit Derivative
- payments of derivatives do not require holder to be exposed to/to actually have losses due to debtor default
- example: credit default swap
15
Q
What is hedging?
A
- Offsetting an open position at risk by entering into an equal and opposite position
16
Q
What is hedge Accounting?
A
- Recognition of offsetting effects of changes in fair values or cash flows of
- hedged item
- hedging instrument
- in financial statements
17
Q
What is the intention of IASB with IFRS9?
A
- politischer Standard
- 1995 Start
- IASB wanted only Fair Value Accounting
- all Financial Assets/Liability as Fair Value, all Changes trough P&L
- Banks did not like it bc. then P&L would have high volatiliy and that is bad for business as it leads to higher risk premium
- IASB wollte, dass FV Accounting weiter geht wie IFRS 9
- Banken wollten jedoch nicht
- FV mit Änderung in der GuV ermöglicht Darstellung der offenen Risikopositionen in der Bilanz –> Vorstand will sich nicht rechtfertigen müssen
18
Q
What are the intentions for IFRS overall?
A
- Adressees: Creditors, Equity providers, Investors
- Fair Representation -> keine stille Reserven
- FV of entity as residual value of FV of activa vs. FV of passiva (doesn’t really work that way)
- Focus on Balance Sheet, da FV meist durch OCI
- Principle Based –> Going Concern; Periodisierung; Stetigkeit
—> keine konkreten Regelungen —> Rule Based
19
Q
What are the principles of HGB in contrast to IFRS?
A
- principle based –> GoB
- Creditor Protection > Information –> nearly no FV
- HGB only Creditors as addressees, IFRS also Investors and equity providers
20
Q
Why did IASB not want full FV Accounting for Financial instruments?
A
- Banken wollten FV Accounting nicht haben
- MGT hätte keinen Einfluss auf Wert, da FV rein marktbestimmt ist
- kein reines historical accounting um politisches Ziel nicht zu verfehlen -> Kompromiss
- Vermeidung, indem neue Produkte entwickelt werden, welche die gleiche Wirkung haben aber per Definition kein Derivat sind
21
Q
What is the longterm objective for IASB?
A
- full FV Accounting
- strongly opposed by banks (and others) in 97 (prior IAS39)
22
Q
What is the short term objective for IASB via IAS39 and IFRS9?
A
- derivatives recognized on balance
- derivatives measured at FV
- all changes immediately in P&L
- except Cash Flow Hedge
23
Q
What is the definition for Fair Value?
A
IFRS13_A
price that would be received to sell asset/paid transfer liability -> orderly transaction between market participants
24
Q
What are the FV hierarchy input Levels?
A
Level 1: #IFRS13_76
- Quoted prices
- active markets
Level 2: #IFRS13_81-82
- Other than Level 1
- can be observed directly or indirectly
- quoted price for similar assets/liability in active
- same in non-active markets
- Other observable inputs
- market-corroborated inputs
Level 3: #IFRS13_86-87
- unobservable Inputs
- used to measure FV to extent that relevant observable inputs are not available
- little market abiliy at measurement date
25
What are the Valuation Techniques used for Fair Value?
Market approach #IFRS13_B5
- prices or other relecant info generated by market transactions involving similar assets
Cost approach #IFRS13_B8
- reflects amount required to replace asset
Income Approach #IFRS13_B10-11
- converts future amounts (eg Cashflow) to single current amount
Amortised Cost
- amount at which Financial Asset is initially recognized
- minus principle repayments
- +/- cumulative amortisation using effective interes method
- - reduction for impairment
26
When are Financial assets/liabilities recognized?
#IFRS9_3_1
- when entity becomes party to contractual provisions of instrument
- Application guidance #9_B_3_1
27
When are Financial Assets derecognized?
IFRS9_3_2_1
- Group perspective first IFRS10
1. Component Approach #IFRS9_3_2_2
- extent to which principle applies -> partial derecognition?
- Criteria: identified CF
- proportionate pro rat share of CF if transfer of rights >90%
- proportional pro rata share of specifically identified cashflows if transfer of rights <90%
2. Risk and reward approach #IFRS9_3_2_3
- Derecognition of a financial asset if the substantial risks and rewards are transferred
- two cases #IFRS9_3_2_4:
- contract exists: transfer of contractual rights to receive CF
- no contract: no transfer of contractual rights but contractual obligation to pay all CF --> pass-through-arrangement #IFRS9_3_2_5
- sale or cession
- eligibility: No additional obligation to pay amounts to recipient (e.g. credit enhancements or guarantees); No possibility of control by seller; Payment is made in full and without any significant delay
3. Control approach #IFRS9_3_2_6
- Derecognition in the event of loss of control
- substantially transferred wisk/Rewards of ownership
- based on exposure to variability of present Value of future net cashflows
- only assessed if risk/reward approach no clear solution
- examples continued regnition
- transferor gives guarantee, transferee keeps var. purchase price reduction
4. Continuing involvement approach #IFRS9_3_2_16
- No derecognition to the extent of continuing involvement
28
When are genuine pension transactions derecognized?
#340bIIHGB
- Rückkaufverpflichtung des Anbieters
- pension provider keeps risk/reward of transferred securities
- consequences: securities still recognised at pension provider, pension provider keeps current profit as well, accounting linke secured borrowing, transferred securities are collateral --> no special accounting rules
29
When are non-genuine pension transactions derecognized?
#340bIIIHGB
- Rückübertragungs*OPTION*
- risk position of pension provider depends exercising probability of put option of recipient
- Put option of recipient of pension is deep in the money than the related substantial risks and rewards are transferred – derecognition
- Put option of recipient of pension is deep out of the money, than the related substantial risks and rewards are retained – no derecognition
- Put option of recipient of pension is neither deep in the money nor deep out of the money – control approach to be assessed
- Financial asset available at market at any time – derecognition because entity has not retained control
- Financial asset not available at market at any time – Continuing involvement – derecognition not (completely) possible because entity has retained control
30
When are securities lending agreement derecognized?
- Securities repurchase agreements (Repo)
- return for payments -> securities transferred to another party
- retransfer obligation #340bIIHGB
- retransfer rights #340IIIHGB
- Securities lending agreements
- obligation of retransfer in same constitution, quality and quantity
- economically equivalent to retransfer obligation
- treatment like retransfer obligation
- Treatment:
- assessment of transfer of substantial risk/reward
- analogue to genuine pension transaction -> no derecognition
- SLA that provides cash deposit from borrower to be accounted as secured loan contract
31
What are examples for partial derecognition?
Sale of interest-strip of capital claim (debt/bond)
32
What is example for full derecognition?
Option not exercised at maturity date
33
What should be done if Chance and Risk approach is unclear?
mathematical comparison of NPV before and after transaction
- if >90% risk transferred --> derecognition
- if <10% risk transferred --> no derecognition
- if 10,x-89,9x% --> see control approach
34
When are financial liabilities derecognized?
#IFRS9_3_3_1
- when obligations are extinguished, discharged, cancelled, expires
35
Auf welcher Basis wird die Klassifizierung durchgeführt?
IFRS9_4_1_1
1. Business Modell
2. Cashflow Criteria
36
Welche 4 Bewertungsvorschriften gibt es im IFRS9?
1. Amortised Cost
2. FVtOCI mit recycling
3. FVtPL
4. FVtOCI ohne recycling
37
How do you classify Debt instruments?
- Business Model test or Cashflow test fail? -> FVtPL
- Business Model test and CF Test dont fail
- HtC: Am Cost #IFRS9_4_1_2
- mixed: FVtOCI with recycling #IFRS9_4_1_2A
- FV Option: FVtPL #IFRS9_4_1_5
38
How do you classify Derivatives?
always FVtPL #IFRS9_4_1_1
39
How do you classify equity instruments?
- Held for Trade yes = FVtPL #IFRS9_4_1_1
- Held for Trade no and exercise FVOCI Option --> FVtOCI without recycling ##IFRS9_5_7_5
- no option -> FVtPL
40
How is the Business Model Test conducted?
#IFRS9_B4_1_1f iVm #IAS24
- auf Ebene des Portfolios von gemeinsam gemanageten FA vergl. Strategie
Faktoren:
- zukünftige Strategie MGT #IFRS9_B4_1_2a
- past practise MGT
- management reporting performance (daily: trading)
- risk and management of risk: langfr. Zinsswap --> HtC
- payment of manager: FV oriented --> trading
41
How are Portfolios determined?
1. Identify Business/reporting units
2. Check if completely homogenous strategy/objectives
3. subdivision until homogenous
42
What is business modell Held to Collect?
- no necessity to hold all assets until maturity #IFRS9_B4_1_3
- Intention to hold cannot be implied if #IFRS9_B4_1_5 / #IFRS9_B4_1_6
- Cashflow intent maximize through sale of the instrument
- portfolio managed/evaluated on FV basis
- Portfolio meets criteria "held for trading"
- Measurement
- if SPPI yes and no FV option --> Am. Cost
- otherwise: FVtPL
- Time horizon for holding
- need not holf all assets until maturity under certain conditions
- frequency, timing, volume, reason to be considered
- may sell if
- increase in credit risk #IFRS9_B4_1_3A
- sale is close to maturity (ca. 3 months) and proceeds approximate collection of remaining Cashflows #IFRS9_B4_1_3B
- infrequent sales (even if single sale significant) or frequent and insignificant #IFRS9_B4_1_3B
43
What is business modell mixed?
- intention
- used for portfolios of Financial Assets that ar managed to *both* collect cashflow and selling #IFRS9_4_1_2a
- Differentiation #IFRS9_B4_1_4B
- sales part of strategy
- greater frequency
- trading books/portfolios solely managed on FV is NOT enough
- Measurement #IFRS9_B5_7_1A
- FVtOCI with recycling if SPPI met, no use of FV Option
- otherwise FVtPL
44
What is business modell other?
- no specific intention #IFRS9_B4_1_5
- examples:
- financial assets held for trading
- Differentiation
- model assigned not Held for sale nor mixed
- held for trading maintained from IAS39
- residual business model
- Measurement: FVtPL
45
How are Business models changed?
#IFRS9_4_4_1
46
What happens when the Financial instruments were erroneously assigned?
Restatement acc. to #IAS8_41ff
47
How did Standardsetter treat financial Liabilities in IFRS9 in general?
- standard setter focused on asset
- liability not linked to asset side, follows different structures and principles
- Anleihe is on passive side when Bankspeciality is happening, in praxis nearly 0
- #Klausur Basic Derivate: ZINSSWAP!
- variables Leg
- Festes Leg --> abzuzinsen mit Marktwert der Zinsen
- Leerverkäufe: Ich verkaufe Produkt zu Termin X in Zukunft zu Preis Y --> Spekulation, das Kurs sinkt
48
How are Financial liabilities classified?
#IFRS9_4_2_1
- grds. Am. Cost
Ausnahmen:
- Model Held for trading: FVtPL
- FV Option
- changes due to own credit, except mismatch -> OCI
- other FV changes -> P&L
- embedded derivatives -> separation to be checked
49
When are financial liabilities treated as amortised cost?
- this is standard treatment acc to IFRS9_4_2_1
- example: bond issued, loan taken out
50
When are financial liabilities treated as FVtPL?
- normally not as debt, however if market value negative
- only possible for interest swap or short selling
- fixed part of interest swap needs to be measured at market value and discounted with current interest rate -> negative SWAP on credit
- option not possible as minimum value 0
51
When are Financial liabilities treated as FVtOCI?
- if credit risk changes Financial Liability Fair Value -> OCI
- if Fair Value changes due to other factors -> P&L
52
How are embedded derivatives treated?
#IFRS9_4_3_1
- separation of underlying and derivative
- example: Wandelanleihe / convertible bond
- Aktiva: FVtPL, not SPPI conform
- Passiva:
- Derivative (convertible right) -> FVtPL
- Bond -> am. Cost
53
How to differentiate Equity and Liability?
1. Redemption Obligation / Rückzahlungsverpflichtung&Sonderkündigungsrecht
- Equity instruments generally no possibility
2. ongoing payments / Zahlungsverpflichtungen
- Zinsen dauerhaft --> financial liability (unavoidable payment obligation)
- Dividend --> avoidable --> equity instrument (dividends decided emittent)
- mixed: need to be separated
54
What is SPPI?
solely payments of principal and interest
55
What are parts of interest?
- Time Value of Money
- Default risk
- other general lending risks
- internal Cost
- margin
56
How do you assess time value of money?
- benchmark instrument (=Standard instrument as loan) to be assessed how interest payments change over time #IFRS9_B4_1_9A-D
--> benchmark test acc to realistic scenarios
- look at complete time to maturity
Factors
- Denomination Currency
- link interest rate and period rate
- *positive examples*
- asset with right to chose market rate on ongoing basis: at each interest rate reset date, borrower can chose between three-month-LIBOR for three months or one-month-LIBOR for one month
- *negative examples*
- CMS Spread coupon (10y CMS - 2y CMS) --> coupon payments depend on difference of to interest rated rather than movements on market rate --> therefore possible that movements are opposite directions --> CF on bonds increase even if LIBOR decreases and vice versa
- Zinssatz steigt mit Laufzeit
- Spekulation: Zinsschere weitet sich
- nicht mehr nur TVM
- bond in USD but paying floating coupon with reset based on EURIBOR --> USD market changes not always captured with EUR interest rates
- significant deviation:
- does not meet conditions in #IFRS9_4_1_2b and #IFRS9_4_1_2Ab
- FVtPL #IFRS9_B4_1_9D
- insignificant deviation:
- meets conditions in #IFRS9_4_1_2b and #IFRS9_4_1_2Ab
- AmCost or FVtOCI
- what is significant --> case based decision
57
How are Interest rate Agreements assessed in regards to TVM?
1. Bank’s published rates applied across a range of retail products and contracts
- General market framework constrains lender --> may conclude SPPI criterion is generally met without significant judgement
2. Variations in rates on specific loans dependent on specified contingent events
- consider nature of contingent events and resulting CF changes --> contract by contract analysis may be required
3. Bank has full discretion to increase the rate on specific loans to borrowers
- contract-by-contract analysis
- = Benchmark test
58
What nature of contingency are covered under TVM?
- Darf nicht 5 Jahre Festzins haben und danach 3x(EUR CMS 10Y - EUR CMS 2Y) until maturity sein
- Zinsschere darf nicht genommen werden
- Auch die Variante 3x EURIBOR/LIBOR darf nicht genommen werden weil Hebelwirkung -> automatisch höher wie Benchmark --> nicht mehr nur TVM
- ok wäre z.B.: EURIBOR **+** 2% weil 2% fixe Marge darstellt, keinen Hebel
59
How is Credit Risk assessed as part of interest?
- consideration for increase in credit risk
- *positive examples*
- CPN STEPS UP/DOWN FOR EA RAT DOWNGRD/UPGRD BY MOODYS/S&P: Baa2/BBB (+25BPS);Baa3/BBB --(+50BPS); Ba1/BB+ OR LOWER (+100BPS) (i.e. coupon increases in case of a rating downgrade and decreases in case of rating upgrade)
- interest rate of a linked note increases in case of rating downgrade
- *negative example*
- Interest payment indexed to another variable such as debtors performance or equity index *unless* indexing to performance leads to adjustment that only compensates for credit risk
- EBIT/EBITDA too far removed from credit risk
60
What is Principla in context of SPPI?
- FV of financial asset at initial recognition
- may change throughout life of financial asset
61
What are components of Principal Payments in context of SPPI?
#IFRS9_4_1_2
- Regular payments
- set forth in contract
- linear, declining, increasing rates or bullet payment at maturity
- extra payment, prepayments, extension options
- agreed upon in original contract, part of legal right in jurisdictions
- appropriate penalty payment (prepayments #IFRS9_B4_1_11b)
- #489BGB nach 10 Jahren kann Privatkunde zur Bank gehen und Kredit kündigen
- in #Klausur wäre Aufgabe kompliziert --> nur wenn Angaben gemacht werden
62
What are changes over time due to contracts in context of SPPI?
- Nature of contingency #IFRS9_B4_1_10
- eg. prepayment before maturity, extension of terms
- determined if only SPPI
- Prepayment option #IFRS9_B4_1_11b
- permits issuer to prepay instrument / permits holder to put debt instrument back to issuer
- before maturity and prepayment amount is substantially unpaid amounts of principal and interest incl. reasonable compensation for early termination
- Guidance to accept AmCost #IFRS9_B4_1_12
- eligible to be measured at AmCost or FVtOCI only if
- entity acquires/originates financial asset at premium/discount to the contractual par amount
- prepayment amount = contractual par amount and accrued (but unpaid) contractual interest (may include reasonable compensation for early termination)
- entity initial recognition of financial asset, the fair value of the prepayment feature is insignificant
63
Was ist die Definition von Non-Recourse Assets?
- creditor claim limited to
- specified assets
- cashflows from specified assets #IFRS9_B4_1_16
- recourse to debtor itself, other assets not possible
- financial asset represent investment in particular assets/cashflow
- contractual cashflows not solely SPPI
- example:
- mortgage loans wich creditor has no right of recourse against debtor but only against real estate collateral in case of default
- financing of toll road --> cash flow from fin.Ass. increase the more cars use it
- most significant risk: Asset or project --> SPPI not fulfilled
- non-recourse itself not necessary exclusion of SPPI #IFRS9_B4_1_17
- creditor needs to assess if particular underlying assets or cashflows to determine SPPI conformity
- examination if:
- terms of financial asset give rise to other cashflows OR
- limit cashflows in manner inconsistent with payment representing principal and interest
- Was ist Asset in SPE (e.g. aircraft)
- Problem: Geben Kredit an SPE
- Rückzahlungen sind fix
- SPE nur ein Asset
- praktisch: ökonomisch abhängig von Performance dieses einen Assets
- Tilgung nur über Gesamtgeschäft
- Non recourse asset -> Geld kommt nur aus non-recourse asset
- hoher Zins als gegenleistung
64
What steps are involved in the Look through approach?
- Step 1:
- CF equals Principal and interest --> Step 2
- contractually fixed cash flows and maturity
- interest = compensation for time value of money and credit risk ( #IFRS9_B4_1_7 ff)
- performance of the financed asset does not influence the installments
- no contractual terms that give rise to any other cash flows or limit the cash lows in a manner inconsistent with payments of principal and interest on the principal amount oustanding ( #IFRS9_B4_1_16 f)
- CF =/= Principal and interest --> Fair Value
- interest contains compensation for asset risk
- contractual terms refer to cash flows dependent on asset performance
- contractual terms that give rise to any other cash flows or limit the cash flows in a manner inconsistent with payments of principal and interest on the principal amount oustanding (e.g. disposal of assets, participation in a positive performance of assets)
- Step 2:
- Credit risk: Am Cost
- According to the terms of the lending arrangement credit risk is the substantial risk (by stipulations regarding the adherence of an appropriate equity base or other covenants)
- Possible indicators
- Redemption of a loan is independent of the asset‘s performance
- Creditor‘s claims are hedged by appropriate collaterals (adequate loan to value)
- Asset Risk: Fair Value
- Based on the fact that the financial asset is a non recourse financial asset the creditors claim is limited to specified assets of the debtor or the cash flows from specified assets
- Hence substantial risk is an asset specific risk
- Possiple indicators
- Redemption of a loan depends on the asset‘s performance
- Financial asset of a special purpose entity (SPE) is debtor‘s essential source of income, there are no relevant collaterals and equity base is low
65
What is the definition for contractually linked notes?
Definition #IFRS9_B4_1_20
- In some types of transactions, an issuer may prioritise payments to holders of financial assets using multiple contractually linked instruments that create concentration of credit risk (tranches)
- each trench has own ranking
- holders of tranche have rights to payment of principal and interest on principal amount outstanding only if issuer generates sufficient cashflows to satisfy higher tranches
- Application for securities - Securitization #IFRS9_B4_1_21
- Cash flows generated by the underlying pool of assets are allocated to tranches of different subordination applying cash flow tests based on tranche specific thresholds
- If one or more of the thresholds are breached in a given period, the relevant tranche will be cut off from interest and/or principal payments for this period (no amortised cost)
- Through this mechanism, it is ensured that higher ranking tranches have priority of the cash flows generated by the pool if these cash flows may not be sufficient to satisfy all interest and/or principal payments due on all tranches (waterfall principle)
66
Ist ESG SPPI konform?
Bsp: Darlehen für energetische Sanierung
- Voraussetzung: CO2- Minderung 10%
- Wenn Minderung nicht erreicht -> Zins wird erhöht
Analyse:
- Zins wird mit ökologischem Merkmal verknüpft
- kein pure-vanilla Instrument mehr
- keine Abhängigkeit mehr allein SPPI #IFRS9_B4_1_7A
- Banken argumentieren: Wenn Öko Ziele nicht erreicht werden dann müssen Emissionszertifikate gekauft werden, dann weniger Zins, dann weniger Bonität
- laut Löw kein unmittelbarer Zusammenhang mit credit default risk -> ESG NICHT SPPI Konform
67
Wie werden Contractually linked instruments auf SPPI konformität geprüft?
1. Erfüllt Vertrag ohne Look through approach Kriterium?
2. Jetzt in SPE reinschauen -> erfüllen Underlying assets das Kriterium?
- wenn nein dann dürfen sie nur der RIsikominimierung dienen
3. Können sich Underlyings über laufzeit ändern?
4. Wenn Kreditrisiko der Tranche > Kreditrisiko der Underlying Assets dann KEIN SPPI, wenn <= SPPI konform
- Senior Tranche Immer SPPI konform
- Junior Tranche nie SPPI konform
68
How do you treat liabilities where the repayment is done in own equity instruments?
- repayment in own equity instruments with non-derivative contracts #IAS32_16b_i
- Equity if: instruments without contractual obligation to deliver a variable number of its own equity instruments --> ergo derliver obligation of fixed number of shares
- repayment in own equity instruments with derivative contracts #IAS32_16b_ii, #IAS32_AG27a-d , #IAS32_26
- fulfillment in:
- Net cash settlement; Net share settlement; Gross physical settlement; Variable number of equity instruments / amount based on changes in a variable underlying; Derivative financial asset / financial liabilitiy
- settlement choice of one party
- derivative: financial asset or liability
- settlement exchanging fixed number of own shares for fixed amount of cash
- derivative - equity instrument
69
How do you treat profit participation rights?
Terms and Conditions
- Financial Instrument
- Bank issues a registered profit participatio right for 100 MEUR
- holder paid whole purchse price
- Repayment: no maturity date
- Termination rights:
- exclusion for holder
- bank: option after 10 years for nominal amount
- ongoing payments:
- coupons 5% p.a. of outstanding amount of PPR
- payment omitted if distribution results in / increases accumulative loss in annual HGB financial statements
- subsequently paid if this does not result in any new accumulated loss
#### Equity or Liability
- Repayment of instrument
- no redemption obligation
- no holder termination right
- --> PPR characterises as Equity
- Termination right of issuer
- termination right (derivative) will be exchanged for fixed amount of cash / other financial asset for fixed number of its equity instruments
- termination right -> equity instrument #IAS32_16b_ii #IAS32_22
**Repayment equals equity capital**
- ongoing Payments
- contractual obligation to pay interest
- payment obligation omitted if there is an accumulated loss
- Bank-specific reserves provide scope that may result in generation of accumulated loss #340gHGB
- payments subject to discretion of the bank #IAS32_26
- some consequences of #340gHGB otherwise possible to make claim acc. to #242BGB , #313BGB
**Ongoing Payments classified as equity
- Variation: Public statement of bank that no "harmful" reserves will be set up in accordance with #340gHGB
**PPR ongoing Payments are financial liability as bank cannot evade payment obligation --> Split Accounting**
70
How do you treat silent partnerships?
Terms and Conditions
- Financial Statement: silent partnership in bank (fully paid)
- Repayment: twenty years to maturity (limited maturity)
- Termination Rights: both silent partner and bank hold termination rights
- Ongoing payments
- contractual fixed percantage of nominal amount + percentage of dividend defined for financial year
- annual payment
- omitted if distribution results in /increases accumulative loss in HGB statement
- omitted distribution subsequently paid if it does not result in any new accumulted loss
#### Equity or Liability
- Repayment of instrument
- limited maturity
- obligation to take back financial instrument and repay capital at end of life of instrument
- termination rights --> holder termination right
**redemption obligation and holder termination right --> liability --> puttable instrument acc. to #IAS32_18b --> one fact would be sufficient**
- Ongoing payments
- contractual obligations of the bank to pay interest
- payment obligation omitted if there is any accumulated loss
- bank specific reserve provide scope which may result in generation of accumulated loss #340gHGB
- Payments are subject to discretion of bank #IAS32_26
- some consequences of #340gHGB -> otherwise possible claim acc to #242BGB , #313BGB
**with regards to payments, Silent partnership are classified as equity**
- Result:
- Silent Partnership: compound instrument: #IAS32_28 in conjunction with #IAS32_AG37
- Contractual obligation to repay nominal amount --> financial liability
- ongoing payment at discretion of bank --> equity instrument
- split accounting acc. to #IAS32_31
- Variation
- silent partnership with unlimited maturity and excluded termination right of holder
- classification of silent partnership as equity instrument since it is no puttable instrument #IAS32_18b
71
How is the initial measurement of financial assets regulated?
#IFRS9_5_1_1
Fair Value plus/minus transaction costs
Exceptions see #IFRS9_5_1_1A-5_1_3
72
How are the subsequent Measurements of Financial Assets regulated?
#IFRS9_5_2_1
According to Classification
- Am Cost
- FVtPL
- FVtOCI
73
How are subsequent measurements of Financial Liabilities regulated?
#IFRS9_5_3_1
According to Classification
- Am Cost
- FVtPL
- FVtOCI
74
When are Impairments done?
- Expected Losses to be recognized at all times for: #IFRS9_5_5_1
- Debt instruments measured at amortised cost - business modell held to collect
- Debt instruments measured at FVtOCI - business model mixed
- Additionally
- Trade receivables and lease receivables (seperate model for calculation)
- Other financial instruments subject to credit risk such as
- irrevocable loan commitments
- financial guarantee contracts
75
What is the theoratical background for impairment?
- Basis for proposal of new impairment rules - alignment of credit risk calculation and accounting treatment of expected losses
- interest rate reflects initial credit loss expectations
- when expected credit losses exceed those initially expected an economic loss is suffered
- final standard
- recognition of portion of expected credit losses initially
- recognizing lifetime expected losses when significant deterioration in credit risk occurs
76
What is the 12-month-ECL?
- Portion of lifetime expected credit losses and representation of amount of expected credit losses resulting from default events that are possible within 12 months after reporting date
77
What is the Lifetime ECL
Expected Credit Loss resulting from all possible default events over the life of the financial instrument
78
What ist the credit loss?
Difference between all principal and interest cash flows that are due to an entity in accordance with the contract and all cash flows the entity expects to receive discounted at original effective interest rate (EIR)
79
What ist the general requirement for impairment?
- Determination of (Lifetime) Expected Loss for maximum contractual period (including prolongation options) an entity is exposed to credit risk
- Combination of detailed estimates and extrapolation of current data allowed
- Expected Credit Losses weighted average of credit losses with respective risks of a default occurring as weights
80
What are the three stages of Impairment?
Stage 1
- No significant deterioration in credit quality
- Rating investment grade
### Stage 2
- Significant deterioration in credit quality
- Rating non investment grade
- Rebuttable presumption met if more than 30 days past due
- z.B. Restaurant während Covid, 30 Tage Zahlungsausfall aber generell gut gehend
### Stage 3
- Credit impaired or incurred loss has occured
- ECL to be updated at each reporting date for new information irrespective of whether financial instrument stays at the same stage
81
What are the details regarding the first stage of impairment?
- 12 month expected credit losses #IFRS9_5_5_17b
- Proxy for adjusting interest rate for initial expected credit losses
- Expected shortfall in all contractual cash flows given probability of default occurring in next 12 months
- Not meaning
- Expected cash shortfalls in the next 12 months
- Credit losses on assets expected to default in next 12 months
82
What are the details regarding the second stage of impairment?
- Assessment of (significant ) deterioration in credit quality - to be included #IFRS9_5_5_17a
- Change in probability of default occurring (not change in expected losses) compared with initial recognition
- Maturity to be included
- Particular measurement methods not prescribed nor is it necessary to explicitly include PD as input
- Operational simplifications
- Recognize 12 month ECL if investment grade
- Rebuttable presumption significant deterioration when payments are more than 30 days past due
- Not necessary to assess for trade and lease receivables - special rules
- Stage 2 kann ggf. auch übersichert sein
83
What are the details regarding the third stage of impairment?
- Credit impaired financial asset (Appendix A, defined terms ) objective evidence after occurance of one or more of the following events #Klausur
- Significant financial difficulty of the issuer or the borrower
- Breach of contract (default or past due event)
- Concessions of the lender due to financial difficutlies of the issuer or borrower
- Probability of bankruptcy or other financial reorganisation
- Disappearance of an active market for the asset (due to financial difficulties)
- Purchase or origination of a financial asset at a deep discount
- Change in calculation interest from gross to net interest
- Interest usually calculated on gross carrying amount before the loss allowance
- Change to calculation on a net basis (on the amortised cost amount that is net of the loss allowance
84
What information is to be used in Impairment?
- #IFRS9_5_5_17c
- Available without undue cost or effort
- Historical, current and reasonable and supportable forward looking information
- Historical information to be updated
- includes:
- Borrower specific
- Macro economic
- Internal default rates and probabilities of default
- External pricing
- Credit ratings
- estimation of credit losses
- probability weighted outcome
- time calue of money
85
How is ECL calculated?
- EL=EAD * PD * LGD
- EAL= Exposure at default: book value development
- PD= Probability at default: explicit requirement for point in time approach, consideration of forward looking developments required determination of multiple year PD
- LGD= Loss given default: consideration of macro development required; prudent adjustments not permitted, even if used for mgt purposes; collateral type/use to be taken into account
- DR= Discount rate: Lifetime expected losses using effective interest rate
86
What is main difference between IFRS9 und IAS39 in impairment?
IAS39 basically no stage 2
stage 3 comes later
87
What scenarios are included in ECL?
# interpretation
- requires model of economic cycles in countries of operation
- different scenarios required
- challenge: find source of macroeconomic models incl. stress testing on national/sub-national/regional basis that are internally consistent
- ECL calc. probability weighted
- starting point broad --> fundamental decision --> taking right scenario to start
- different scenarios --> similar implications regardless
# interpretation
- different scenarios --> similar implications regardless
88
What are POCIs?
- Who buys it: specialized banks
- credit-impaired at initial recognition (Purchased or Originated Credit-Impaired, POCI) ( #IFRS9_5_5_13)
- Recognition – acquired at discount reflecting incurred credit losses
- not itself disqualify from being measured at amortised cost
- Expectation on initial recognition
- Debtor will not/not fully pay debts
- Consequence
- Always outside general model
- High risk taken into account in FV at initial recognition
- --> No loss allowance at initial recognition
89
What is the subsequent measurement of POCIs?
- loss allowance depends on (possibly) changing expectations about credit losses compared to expectations at initial recognition
- Loss allowance recognised directly and only in P&L
- Possibility to recognise a positive loss allowance if expectations improve compared to the expectations at initial recognition
- POCI assets mainly expected in connection with modifications of nonperforming loans
### credit adjusted effective interest rate
- obligatory use
- no day one allowance on balance
- no day one impairment loss recognised
- allowance on balance --> changes in lifetime credit loss expectations
90
What is meant with modification?
- two main reasons
- change of contract due to strong market position
- change of contrafct due to financial problem
- also e.g. government moratorium --> 3 month payment pause
- no sense to have different stages for assets of same borrower
- accounting rules for derecognition dont deal with modification
91
How to fill a gap in IFRS?
- #IAS8_10 bis #IAS8_12
- absence of applicable IFRS
- MGT judgement to develop accounting policy
1. relevant to the economic decision-making need of users
2. reliable, in that the financial statements:
1. represent faithfully the financial position, financial performance and cash flows of the entity;
2. reflect economic substance of transactions, other events and conditions, not merely the legal form;
3. neutral, i.e. free from bias;
4. prudent;
5. complete in all material respects“ ( #IAS8_10)
- shall refer to and consider in descending order:
- requirement in IFRS dealing with similar/related issues
- definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the Framework “ ( #IAS8_11)
- may also consider most recent pronouncements of other standard setting bodies with similar conceptual framework when not in conflict with above #IAS8_12
92
What are the conclusions for Modification?
1. No rules reg. modifications of contracts of financial assets in IFRS 9
2. Rules governing equivalent questions in (other) regulations of IFRS to be applied
3. IFRS 9 modification of contracts regarding financial liabilities
--> #IFRS9_3_3_2 to be applied
- Change of debt instruments with substantially different terms
- Treatment: repayment of original financial liability, recognition of a new liability
- Obligation to be applied and taken over for financial assets according to #IAS8_11a
93
How to decide if Modification leads to derecognition?
Step 1: Did contractual CF expire?
- if completely yes: complete derecognition
- if partially yes: partial derecognition
Step 2: Applied to
- residual financial assets after partial derecognition
- financial asset before modification
Are Modifications substantial or not?
- if yes: full derecognition
- if no: adjust book value
94
What is defined as substantially different terms?
#IFRS9_B3_3_6
- quantitative test -> 10%
- qualitative test
- Change of currency
- Absence of a market for the asset (bond)
- No conformity with SPPIcriteria after modification (for example equity kicker)
- Change of nominal/maturity/colalteral
- Prolongation/New repayment options
### Seperate line item
- #IAS1_82aa
- no derecognition in P&L
- adjustment of impairment at date of derecognition
95
How are Loan Comittment and financial Guarantee Contracts regarding Impairment?
- In Scope for Impairment model
- Remaining contractual period, or shorter, over which entity is exposed to credit risk to be considered (longest period is contractual period exposed to credit risk)
- Expected credit losses presented as liability on the balance sheet
96
What is meant with the simplified Impairment approach?
- trade receivables / contractual assets --> not contain significant financing component
- no need to calc. 12-month-ECL when significant increase of credit risk occurs
- Lifetime ECL calc.
- Lease rec/trade rec. with significant financing component --> #IFRS9_5_5_15 , #IFRS9_5_5_16 accounting choice to measure loss allowance at lifetime ECL on initial recognition
97
What is the objective of hedge accounting?
- Simultaneous and identical presentation of hedged item and hedging instrument
- Elimination of impact on profit or loss
98
What accounting Choice applies to hedge accounting?
- #IFRS9_7_2_21 --> one time only chance
- continuing applying IAS39
- apply IFRS 9
- cannot go back to IAS39 after
99
What hedged items are defined in IFRS9
#IFRS9_78
- Assets
- Liabilities
- Firm commitments
- already contract: deliver 1k christmas trees in December signed in july
- Highly probable forecast transactions (without legal obligations, like future purchases or sales)
- in april 21 enter hedging contract in april 22 for FX Risk
- Net investment in a foreign operation
- Group of above
100
What are Hedging instruments?
- Derivatives #IAS39_72
- FX Risk --> non derivative Asset or liability
- written options generally no #IAS39_73, #IAS39_AG94
101
What hedging strategies are allowed under IAS39
- Transaction based hedging ( #IAS39_78) (single risk, single hedging instrument)
- more than one risk, single hedging instrument ( #IAS39_76) (e.g. currency and interest rate risk)
- single risk, combination of hedging instruments ( #IAS39_77)
- Hedging of portions of risks of a financial instrument ( #IAS39_81)
102
What hedging strategies do not qualify?
- Macro hedges
- exception: portfolio hedges of interest rate risk ( #IAS39_84 , #IAS39_78)
- Hedging internal transactions ( #IAS39_80)
- Hedging of groups of assets, liabilities, firm commitments or highly probable forecast transactions with unequal risk exposure ( #IAS39_78)
103
What Accounting Models exist?
#IAS39_86
Fair Value Hedge
- Asset/liability hedge against Market Risk
- main intent: debt instruments with fixed interest rate
### Cash Flow Hedge
- Hedge against future against CF risk
- main intent: debt instrument with variable interest rate
104
What documentations are needed for hedges?
- Designation of relationship --> documentation ( #IAS39_88a)
- Hedging relationship
- Hedging objectives and
- Hedging strategies
- Documentation = identification ( #IAS39_88a)
- Hedging instrument
- Hedged item or underlying transaction
- Risk to be hedged
- If forecast transaction to be hedged, evidence of high probability and of related variations in cash flows ( #IAS39_88b )
105
How is hedging effectiveness assessed?
- Measurability of hedge effectiveness ( #IAS39_88d)
- Expectation: high effectiveness at inception ( #IAS39_88b, #IAS39_AG105-113)
- Assessment of effectiveness during (range of 80% to 125%) ( #IAS39_88d #IAS39_AG105)
- Continuous assessment (at least quarterly) ( #IAS39_88e , #IAS39_AG106)
106
What is the Methods for assessing Hedge Accounting?
- No method specified ( #IAS39_AG107)
- has to be
- appropriate
- used consistently for similar hedges
- documented
- Effectiveness measured between external hedging instrument and hedged item
- Evidence of effectiveness provided on period-by-period / cumulative basis over full term of hedging relationship
107
What is the short cut method of Hedge Accounting?
- If critical terms of hedged item and hedging instrument match exactly, then prospective hedge effectiveness can be assumed
- notional and principal amount
- terms
- repricing dates
- dates of interest and principal receipts and payments
- basis of measuring interest rates
- No exception from requirement to demonstrate retrospective effectiveness (no short cut method) und IFRS
- USGAAP explicitly permitted
108
When is hedge accounting discontinued?
- #IAS39_91, #IAS39_101
- no longer meets criteria
- instrument expires or is sold, terminated or exercised
- forecast transaction no longer expected
- Impact:
- seperate measurement of hedged item and hedging instrument
- hedged item according to rules for relevant category
- hedging instrument in profit or loss
109
What is Fair Value Hedge?
- Hedging line items against possible FV changes with effect on profit or loss resulting from a specific risk – examples
- Hedging fixed interest rate loans against risk resulting from change of market interest rate
- Hedging future obligations to deliver resources against change in resource prices (price changing risk)
- According to the name Fair Value Hedge
- Hedging of changes of the fair value of a hedged item
- Example – fixed interest rate bond
- Market value of the bond fluctuates in respond to interest rate changes of the market (not restricted to intervention of central banks)
110
What is the normal accounting treatment for the Fair Value hedged item?
- Adjustment of carrying amount by fair value changes attributable to hedged risk (hedge adjustment)
- Immediate recognition of these fair value changes in profit or loss
→ Deviation from general accounting principles for hedged items
111
What is the normal accounting treatment for Fair Value Hedging instrument?
- Immediate recognition of fair value changes in profit or loss
→ In accordance with general accounting principles for derivatives
112
What is the definition for a cashflow Hedge?
- Hedging cash flows against variability in cash flows that could affect profit or loss and result from a specific risk – examples
- Swap to convert a variable interest-bearing financial asset or a variable interest-bearing financial liability to a fixed interest rate financial asset or fixed interest rate financial liability
- Hedging of foreign currency risk of a highly probable purchase commitment with a fixed price in foreign currency
- According to the name Cash Flow Hedge
- Hedging of changes of variable cash flows of a hedged item
- Example – variable interest rate bond
- Cash flows of the bond fluctuates in respond to interest rate at the point in time of payments due to changes of the market day by day meanwhile
113
What are special requirements for forecast requirements?
- High probability of occurrence ( #IAS39_78)
- No hedged item if forecast transaction cannot be sufficiently specified
- Possible changes in timing of forecast transaction do not affect hedging relationship if effectiveness does not change ( #IAS39_IG_F_5_4)
- In assessing likelihood that a transaction will occur to be considered ( #IAS39_IG_F_3_7)
- Frequency of similar past transactions
- Financial/operational situation which may prevent the transaction
- Substantial commitments of resources to a particular activity
- Extent of loss/disruption of operations if transaction does not occur
- Alternatives with different characteristics to achieve business purpose
- Entity’s business plan
114
What is the accounting treatment in normal cases for Cashflow Hedged item?
- No adjustment of carrying amounts/recognition of adjustments of financial assets classified at FVtEquity (no hedge adjustment)
→ In accordance with general accounting principles for hedged items
115
What is the accounting treatment in normal cases for cashflow hedging instrument?
- All changes attributable to effective portion of hedge to be recognised directly in revaluation reserve (OCI)
- Reclassification of gains and losses recognised directly in equity (OCI) into profit or loss in period in which hedged transaction affects profit or loss (at latest upon termination of hedging relationship)
→ Deviation from general accounting principles for derivatives
116
What accounting treatment in special cases of forecast transactions for hedged item?
- Forecast transaction that results in assets or liabilities – gains or losses attributable to hedging instrument (derivative) that were recognised directly in equity to be treated as follows (subsequent treatment)
- Financial assets or financial liabilities: Reclassification into p/l in same period in which hedged item affects profit or loss ( #IAS39_97)
- Non financial assets or non financial liabilities: Same treatment as for financial assets/liabilities or inclusion in initial carrying amount of non financial asset or non financial liability ( #IAS39_98-99)
117
What are the accounting treatments for special case of forecast transactions in case of early termination?
- Forecast transaction occurs: Accumulated gains or loss on hedging instrument remain separately in equity until forecast transaction occurs
- Forecast transaction does not occur: If forecast transaction is no longer expected to occur accumulated gain or loss on hedging instrument to be recognised in profit or loss immediately
- forecast transaction happens: subsequent treatment to differentiate further between kind of asset (financial or non financial)
- Treatment makes sure that hedge effect due to the hedging period remains valid after early termination
- In cases where no forecast transaction occurs economically hedging was not existent – accounting illustrates that effect as early as possible
118
What are presentation on Balance Sheet of Hedged items and hedging instruments?
- Hedged item – no adjustments
- Hedging instrument (derivative) – resented as derivatives in hedge relationship (both as an asset or a liability)
119
What are the presentation on income statements of hedged items and hedging instruments?
- Separate line item income/expense from hedge relationships for ineffective part
- Separate line item in equity (OCI) cash flow hedge reserve for effective part
120
What are objective of hedge accounting in IFRS9?
- Reflect in financial statements the effect of an entity’s risk management activities
- Introduce a more principlebased approach
- Align hedge accounting more closely with risk management
-> Advantages more corporate than bank related
121
What are changes in micro hedge accounting?
- Qualifying hedged items ( #IFRS9_6_2_1 – #IFRS9_6_2_3)
- Combination of an exposure and a derivative, a component or percentage of a nominal amount, and ‘one-sided‘ risks
- Risk components as part of either a financial or non-financial item if separately identifiable and reliably measurable
- Kupferblöcke --> Durchschnittlicher Kupfergehalt wird berechnet und Anteil wird kupfergehedged
- Kaffe -> Kaffeepreis und USD als Risiko --> beides separat absicherbar
- Non-derivative financial instruments eligible for designation as a hedging instrument ( #IFRS_9_6_2_2)
- Hedge accounting for investments in equity instruments designated as at fair value through OCI allowed ( #IFRS_9_6_1_1)
- völliger Quark weil nichts bringt weil kein Transfer in GuV
- Hedge effectiveness assessment based on risk management strategy and only prospectively ( #IFRS9_6_1_1)
- Elimination of 80-125% range when determining hedge effectiveness
- Rebalancing of a hedge ratio to still meet risk management objective
- Consideration of new hedge accounting requirements only in context of closed portfolios
- No voluntary discontinuation of hedge accounting if hedging relationship still meets risk management objective
- Continue application of IAS 39 for portfolio hedge of interest rate risk ( #IFRS_9_6_1_3)
- Macro hedge accounting (hedge of open portfolios) not addressed (separate Discussion Paper in April 2014)
122
What are qualifying Hedged Items new in IFRS9?
- Risk components of non-financial items
- Aggregated exposure
- groups (restrictions removed)
- Net positions (with some restrictions)
123
What are non-qualifying hedged items?
- entity’s own equity instruments
- Most intragroup items
- Firm commitment to acquire a business in a business combination (except for FX risk)
- Fair value hedge of investments where at equity method used
- Risks that have no impact on P/L
124
How is hedge effectiveness defined in IFRS9?
#IFRS9_6_4_1
- Extent to which changes in fair value or cash flows of the hedging instrument offset changes in fair value or cash flows of hedged item
125
What criteria is for qualification of Hedge Effectiveness?
#IFRS9_6_3_4_1c
- Economic relationship between hedged item and hedging instrument and opposite movements in value
- Effect of credit risk does not dominate value changes
- Same hedge ratio as the one used in entity’s risk management provided no imbalance inconsistent with objective of hedge accounting
126
What is the derivative method regarding hedge effectiveness?
- Measurement method of changes in fair values on hedged item
- Hedge ineffectiveness:
- Change in FV of contracted derivative vs.
- Change in FV of hypothetical derivative
- Hypothetical derivative iteself – derivative with terms exactly matching the critical terms of the hedged item
127
What are sources of FV Hedge ineffectiveness?
- Credit risk (counterparty and entity’s own – CVA/DVA)
- Floating component of an interest rate swap in a FVH of the interest rate risk component of a fixed rate debt
- Designation of a debt instrument that includes a prepayment option hedged with a plain vanilla interest rate swap
- Hedging with options and time value not aligned
128
What are sources of CF Hedge inefectiveness?
- Credit risk (counterparty + own credit risk on derivatives)
- Basis risk (example – debt indexed on Euribor 6 month versus an interest rate swap indexed on Euribor 3 month)
- Interest rate resets (example – CFH of a floating debt indexed on Euribor 3 month resets in January, April, July, October with an interest rate swap resets in March, June, September, December)
- Forecast transaction occurs in an earlier (or later) period than originally anticipated
- Hedging with options and time value not aligend
129
What is the definition of rebalancing?
- Changes in quantities of the hedged items or hedging instruments ( #IFRS_9_B6_5_7)
- Allows continuation of a hedging relationship by adjusting hedge ratio
130
When is rebalancing required?
- changes in an economic relationship between hedged item and hedging instrument but without change in risk management objective ( #IFRS9_6_5_14b)
- Mandatory
131
How is rebalancing done?
- Continuation for the entire relationship – but ( #IFRS9_B6_5_8)
- Ineffectiveness in P/L just before rebalancing
- Accounting treatment depends on whether the change in hedge ratio is achieved by adjusting the hedged item or the hedging instrument
- Update formal documentation of the hedging relationship
132
What changes when volume of hedged item increases?
Hedged item
- Previously designated amount unchanged
- Additional volume is included from date of rebalancing
Hedging instrument unchanged
133
What changes when volume of hedged item decreases?
Hedged item
- Reduced volume unchanged
- Decrease in volume is discontinued from date of rebalancing
Hedging instrument unchanged
134
What changes when volume of hedging instruments increases?
Hedged Items unchanged
Hedging instruments
- Previously designated volume unchanged
- Additional volume is included from date of rebalancing
135
What changes when volume of hedging instruments decreases?
Hedged Items unchanged
Hedging instruments
- Reduced volume unchanged
- Decrease in volume is measured at FVTPL from date of rebalancing
136
When is hedge accounting discontinued obligatory?
- #IFRS9_6_5_10, #IFRS9_6_5_12
### When
- Qualifying criteria no longer met
- Hedging instrument expires or is sold, terminated or exercised
- Hedging effectiveness requirements no longer met (after rebalancing)
- Forecast transaction is no longer highly probable
### Impact
- CFH –amounts deferred in CFH to be recycled if forecast transaction no longer expected to occur
- (FVH – amortisation to begin when hedge accounting ceases)
- Option to designate hedged item and/ or hedging instrument in a new hedge relationship – prospective effect
- Specific treatment for elements excluded from designation
137
Was ist bei Einstufung der ESG Linked Bonds zu beachten?
- Bei Einstufung zu untersuchen inwiefern Bindung an ESG Rating des Unternehmens die Klassifizierung beeinflusst
- Geschäftsmodell
- SPPI: Entgelt nur für Zeitwert des Geldes und des Kreditrisikos oder andere grundlegende Kosten (Admin und Marge)
138
Wie beeinflussen Nachhaltigkeitsfaktoren in Kreditrisiko des Emittenten ein?
- Unternehmen bestimmt nach eigenem Ermessen, ob direkter Einfluss der spezifische Nachhaltigkeitsfaktoren auf das Kreditrisiko des Emittenten ergibt
- wenn ja, dann Schwankungen von CF die auf Nachhaltigkeitsfaktoren zurückzuführen
- Erfüllt dann trotzdem noch SPPI, da Komponente des Kreditrisikos widerspiegelt #IFRS9_B4_1_7A
- Fälligkeitstag halten --> AC Kategorie
139
Wann ist SPPI Kriterium der ESG Bonds nach dem discussion paper des IASB erreicht?
- Eintritt des Ereignisses spezifisch für Schuldner
- Erreichung eines vertraglich spezifiziertes Ziel durch Schuldner abhängig
- resultierende vertragliche Zahlungsprämie darf weder eine Investition in Schuldner darstellen noch Gläubiger der Wertentwicklung von zugrungeliegenden Vermögenswerten aussetzen
140
Was ist Ein Beispiel für ein ESG-Linked Bond der SPPI Kriterium nicht erfüllt
- vertragliche Zinszahlung mit periodischer Anpassung wenn marktbestimmter CO2 Preisindex einen vertraglichen Schwellenwert erreicht
- kein SPPI Kriterium
- entsprechendes Ereignis allgemeine Marktentwicklung, nicht spezifisch auf Schuldner zurückzuführen, daher kein basic lending principle
141
Was ist ein Beispiel für ein ESG-Linked Bond der SPPI Kriterium erfüllt?
- vertragliche Zinszahlung mit Anpassung um spezifische Punktezahl wenn der Schuldner eine vertraglich festgelegte Reduktion der Treibhausgasemissionen in der vorangegangenen Periode erreicht hat.
- Ereignis ist spezifisch für Schuldner
- Zinsänderung rein SPPI Konform
- vertragliche CF KEIN Investment in Schuldner oder abhängig von Performance spezifischer Assets
142
Was sind "Green Bonds"?
In großem Umfang werden mittlerweile Finanzinstrumente emittiert, die für sich das Label „Green Bond" in Anspruch nehmen. Hierunter wird die Aufnahme von Mitteln verstanden, die für Aktivitäten bzw. Investitionen zur Verringerung bzw. Verhinderung von Umwelt- bzw. Klimaschäden dienen sollen
143
Welche Arten von Green Bonds gibt es?
**Standard Use of Proceeds Bond**
Hierbei handelt es sich um eine konventionelle Anleihe, die mit einem vollen Rückgriffsrecht auf den Emittenten ausgestattet ist. Die Emissionserlose werden fur -grine Zwecke eingesetzt
**Green Revenue Bond
**Im Gegensatz zu einem Standard Use of Proceeds Bond besteht kein Rückgriffsrecht auf den Emittenten. Die Tilgungs- und Zinszahlungen werden durch die Einnahmen des zumeist mit hoheitlichen Rechten ausgestatteten Emittenten (bspw. Gebühren, Steuern oder Umsätze, die sich aus „grünen" Projekten ergeben) geleistet.
**Green Project Bond**
Als Green Project Bond gelten Projektanteihen für ein oder mehrere „grüne" Projekte, bei denen der Investor direkt den Projektrisiken ausgesetzt ist. Die Tilgungs- und Zinszahlungen werden grundsätzlich durch die «grünen" Projekte selbst erzeugt. Zusätzliche Rückgriffsrechte auf den Emittenten können jedoch vorgesehen sein.
**Green Securitised Bond**
Bei dieser Art von Green Bonds handelt es sich um Anleihen, die durch ein oder mehrere «grüne* Projekte besichert sind. Dazu zählen z.B. Asset Backed Securities (ABS), Mortgage Backed Securities (MBS) oder ähnliche Strukturen. Die Tilgungs- und Zinszahlungen gehen grundsätzlich aus den Zahlungsströmen der -grünen* Projekte hervor.
144
Beschreibe Unterschiede zwischen IFRS 9 und HGB
145
Beschreibe Unterschiede zwischen IFRS 9 und HGB
146
Beschreibe Unterschiede zwischen IFRS 9 und HGB
IFRS
flashcards
Decks in class (31)
# Cards
-
Anwendbarkeit IFRS17
-
Bingo IFRS und IAS Nummern und Namen31
-
Corporate governance4
-
IAS38 IVW15
-
IAS16 SAV19
-
IAS36 Impairment Testing17
-
IAS2 Vorräte7
-
IFRS15 UE22
-
IFRS16 Leasing30
-
IAS37 sonstige RSt15
-
IAS19 Personal/PensionsRST20
-
IAS12 latente Steuern13
-
IFRS 9146
-
IAS7 Kapitalflussrechnung26
-
IAS8 Bilanzierung, Bewertung, Schätzungen, Fehler (Vgl. mit DRS 13)12
-
IAS1 Darstellung2
-
IAS10 Ereignisse nach Berichtsperiode1
-
IAS21 Währungsumrechnung17
-
IAS29 Hyperinflation2
-
IAS23 FK-Kosten1
-
IAS24 nahestende Personen6
-
IAS28 AU / GU (Equity)3
-
IAS33 Ergebnis je Aktie9
-
IAS34 Zwischenberichterstattung5
-
IAS40 investment properties3
-
IFRS2 Aktienoptionen11
-
IAS184
-
ESG4
-
IFRS 31
-
IFRS 51
-
IFRS 81
