Sale of loans guarantee retained – This is an illustration of how derecognition is applied in practice. The objective is to present the mechanics of applying the IFRS 9 requirements for derecognition of financial assets, starting with an analysis of the transaction using the flowchart [IFRS 9 B3.2.1], and culminating with the initial and subsequent accounting entries for both the transferor and transferee.
Background and assumptions
Entity P has originated a group of similar five-year fixed rate corporate loans for €9,980,000 with the intention of selling them to a bank in the near future. It is, therefore, accounting for these loans at fair value through profit or loss before the sale.
Subsequently, P assigns the … Read more