kim2_0001748 - b i a sale and repurchase transaction where...

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b) i) a sale and repurchase transaction where the repurchase price is a fixed price or the sale price plus a lender’s return ii) a sale of a financial asset together with a total return swap that transfers the market risk exposure back to the entity The principle here is that of substance over form. An entity should derecognise a financial liability when it is extinguished – i.e. when the obligation specified in the contract is discharged or cancelled or expires. It is possible for only part of a financial asset or liability to be derecognised. This is allowed if the part comprises: 111 S T U D Y T E X T a) only specifically identified cash flows; or
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b) only a fully proportionate (pro rata) share of the total cash flows for example, if an entity holds a bond it has the right to two separate sets of cash inflows: those relating to the principal and those relating to the interest. It could sell the right to receive the interest to another party while retaining the right to receive the principal.
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