Page 115 - Annual Report 2019

112 ANNUAL REPORT 2019 QFC REGULATORY AUTHORITY FINANCIAL STATEMENTS

Financial liabilities
De-recognition Impairment of financial assets
A financial asset (or, where applicable, a part of a The QFC Regulatory Authority recognises an allowance
financial asset or part of a group of similar financial for expected credit losses (ECLs) for all debt instruments. Initial recognition and measurement
assets) is primarily de-recognised when: ECLs are based on the difference between the contractual Financial liabilities are classified, at initial recognition, as
• The rights to receive cash flows from the asset have expired cash flows due in accordance with the contract and all financial liabilities at fair value through profit or loss, loans
or the cash flows that the QFC Regulatory Authority expects and borrowings, payables or as derivatives designated as
• The QFC Regulatory Authority has transferred its rights to to receive, discounted at an approximation of the original hedging instruments in an effective hedge, as appropriate.
receive cash flows from the asset or has assumed an effective interest rate. The expected cash flows will include The QFC Regulatory Authority determines the classification
obligation to pay the received cash flows in full without cash flows from the sale of collateral held or other credit of its financial liabilities at initial recognition.
material delay to a third party under a “pass-through” enhancements that are integral to the contractual terms.
arrangement; and either (a) the QFC Regulatory Authority All financial liabilities are recognised initially at fair value
has transferred substantially all the risks and rewards ECLs are recognised in two stages. For credit exposures for and, in the case of loans and borrowings and payables,
of the asset, or (b) the QFC Regulatory Authority has neither which there has not been a significant increase in credit risk net of directly attributable transaction costs. The QFC
transferred nor retained substantially all the risks and since initial recognition, ECLs are provided for credit losses Regulatory Authority’s financial liabilities include finance
rewards of the asset, but has transferred control of the asset that result from default events that are possible within the lease obligation, accounts payable and accrued expenses.
next 12 months (a 12-month ECL). For those credit exposures
When the QFC Regulatory Authority has transferred its rights for which there has been a significant increase in credit risk Subsequent measurement
to receive cash flows from an asset or has entered into a pass- since initial recognition, a loss allowance is required for credit
through arrangement, it evaluates if, and to what extent, it losses expected over the remaining life of the exposure, The subsequent measurement of financial liabilities
has retained the risks and rewards of ownership. When it has irrespective of the timing of the default (a lifetime ECL). depends on their classification as described below:
neither transferred nor retained substantially all of the risks
and rewards of the asset, nor transferred control of the asset, The QFC Regulatory Authority considers a financial asset in Accounts payable and accruals
the QFC Regulatory Authority continues to recognise the default when contractual payments are past due. However, Considering the short-term nature of these liabilities,
transferred asset to the extent of its continuing involvement. in certain cases, the QFC Regulatory Authority may also accounts payable and accruals are recognised for amounts
In that case, the QFC Regulatory Authority also recognises an consider a financial asset to be in default when internal to be paid in the future for goods or services received
associated liability. The transferred asset and the associated or external information indicates that it is unlikely to without discounting, whether billed by the supplier or not.
liability are measured on a basis that reflects the rights and receive the outstanding contractual amounts in full before
obligations that the QFC Regulatory Authority has retained. taking into account any credit enhancements it holds. A De-recognition
financial asset is written off when there is no reasonable
Continuing involvement that takes the form of a expectation of recovering the contractual cash flows. A financial liability is de-recognised when the obligation
guarantee over the transferred asset is measured at the under the liability is discharged, cancelled or expires. When
lower of the original carrying amount of the asset and an existing financial liability is replaced by another from the
the maximum amount of consideration that the QFC same lender on substantially different terms, or the terms
Regulatory Authority could be required to repay. of an existing liability are substantially modified, such an
exchange or modification is treated as the de-recognition
of the original liability and the recognition of a new liability.
The difference in the respective carrying amounts is
recognised in the statement of comprehensive income.