Reporting the financial performance of a range of entities (C 1.3)

Financial Assets and Liabilities Derecognition:

Financial Assets Derecognition:

1. Derecognition: An asset is removed from the balance sheet when contractual rights expire or the asset is transferred.
2. Transfer: This involves transferring cash flow rights or assuming an obligation to pay cash flows to a third party.
3. Risk and Reward Assessment: Companies evaluate their retained risks and rewards of ownership.
4. Derecognition Gain/Loss: The difference between the carrying amount and consideration received is recognized in profit or loss.
5. Continued Recognition: If substantial risks and rewards are not transferred and control is retained, the asset remains on the balance sheet.

Financial Liabilities Derecognition:

1. Derecognition Triggers: Discharge, cancellation, or expiration of the obligation.
2. Substantial Modification: If the present value of cash flows changes by at least 10%, the original liability is extinguished, and a new one is recognized.
3. Non-Substantial Modification: The original liability is adjusted to the present value of revised cash flows, with the change recognized in profit or loss.
4. Gain/Loss on Derecognition: The difference between the carrying amount and consideration paid is recognized in profit or loss.

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