Transfers of Assets Flashcards
If assets are transferred, what are the two ways this transfer may be treated?
A sale, meaning control was given up and the asset is derecognized
A secured borrowing since control wasn’t given up, and the asset (or part still controlled) stays on the books
When service rights are purchased, at what amount are they reported? Should they be amortized?
Report at FMV (amount paid for the asset)
Amortize in proportion to the revenues received (not SL)
At what amount should servicing rights be measured if retained in the sale of a financial asset?
FMV, not a proportionate amount of the carrying value of the original asset
Is the servicing function inherent in all financial assets?
Yes
When a debtor is released from primary responsibility for a debt, has the debt been extinguished (generating a gain or loss)?
Yes, this satisfies the criteria to remove the debt from the books and recognize a G/L even though the debtor may still be secondarily responsible (making them a guarantor of the debt)
Can you extinguish debt by creating and fully funding an irrevocable trust to pay it off?
Creating and funding an irrevocable trust to satisfy all obligation of the debt, called an insubstance defeasance, would not cause the debt to be extinguished. Debt is extinguished only if the debtor pays the creditor or is legally released from the debt by the creditor or the law/courts.
Under IFRS, what conditions must be met for an asset to be considered transferred?
Transferred outside of consolidated group
All control given up (no risks or rewards of ownership retained)
How are servicing rights treated under IFRS?
Under IFRS, servicing rights retained in the transfer of a financial asset are considered to be a retained interest in the transferred asset, not a new separate asset, with value allocated as a portion of the carrying value of the entire financial asset before transfer
