ACCA SBR ^INT Syllabus B. The Financial Reporting Framework - Chapter 5: De-Recognition - Notes ^{12 / 18}

Transferred Component

The assets / Liabilities that have been transferred to another party - these are normally derecognised - and Income / expenses shown

Retained Component

Any assets / liabilities left over - these are not derecognised and no Income / expenses shown

Strange Situations

... where we don't derecognise

1. Asset transferred but retains exposure to significant variations in benefits

2. Asset transferred to an agent of yours (holding it for you)

3. Asset transferred and, at the same time, entered into another transaction that results in rights or obligations to reacquire the asset. 

   Eg a forward contract, a written put option, or a purchased call option

Modified Contracts

1. Only eliminates existing rights or obligations, normal derecognition rules apply

2. Only adds new rights or obligations, either show as new Assets and Liabilities or...

    as part of the same unit of account as the existing rights and obligations 

   (whichever gives best Faithful Representation)

3. Both eliminates existing rights/obligations and adds new ones

   Potentially so big a modification that in substance, the modification replaces the old asset or liability with a new asset or liability. 

   So, derecognise the original asset or liability, and recognise the new asset or liability.