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Exposure Draft of the Indian Accounting Standard (Ind AS) 109, Financial Instruments (Comments to be received by October 25, 2014)
October, 01st 2014
               Exposure Draft


 Indian Accounting Standard (Ind AS) 109,
          Financial Instruments




 (Last date for Comments: October 25, 2014)




                   Issued by
         Accounting Standards Board
The Institute of Chartered Accountants of India
                    Exposure Draft
        Indian Accounting Standard (Ind AS) 109
                 Financial Instruments
Following is the Exposure Draft of Indian Accounting Standard (Ind AS) 109,
Financial instruments issued by the Accounting Standards Board of The Institute
of Chartered Accountants of India, for comments. The Board invites comments on
any specific aspect of the Exposure Draft. Comments are most helpful if they
indicate the specific paragraph or group of paragraphs to which they relate,
contain a clear rationale and, where applicable, provide a suggestion for
alternative wording.

Comments should be submitted in writing to the Secretary, Accounting Standards
Board, The Institute of Chartered Accountants of India, ICAI Bhawan, Post Box
No. 7100, Indraprastha Marg, New Delhi 110 002, so as to be received not later
than October 25, 2014. Comments can also be sent by email to
commentsasb@icai.in       or    can   now       be    submitted     online   on
http://www.icai.org/comments/asb/. Further clarifications on this Exposure Draft
can be sought by email to achin.poddar@icai.in.


Indian Accounting Standard (Ind AS) 109 supersedes Ind AS 39, Financial
Instruments: Recognition and Measurement.

(The Exposure Draft of the Indian Accounting Standard includes paragraphs set
in bold type and plain type, which have equal authority. Paragraphs in bold type
indicate the main principles. This Exposure Draft of the Indian Accounting
Standard should be read in the context of its objective and the Preface to the
Statements of Accounting Standards1)



Questions to the Respondents
Question 1:

Paragraph 4.1.4 of this standard provides an irrevocable option to an entity at
initial recognition for particular investments in equity instruments that would
otherwise be measured at fair value through profit or loss to present subsequent
changes in fair value in other comprehensive income (OCI). Further, Paragraph
5.7.1(b) prohibits recognition of gain or loss on remeasurement at fair value of
such instruments in profit or loss.

There is a view that though the standard may permit an entity to elect the option
provided in paragraph 4.1.4 with respect to equity investments, yet, gains or losses
                                                            
1
   Attention is specifically drawn to paragraph 4.3 of the Preface, according to which
  accounting standards are intended to apply only to items which are material.
accumulated on such investments should be permitted to be reclassified in profit
or loss on derecognition of such investments, for example, on sale thereof. The
proponents of this view argue that on derecognition, the gains and losses are
realised and, therefore, there is no justification of recognising the realised gains
and losses in OCI.

On the other hand, the counter-view is that as designation of equity investments
through other comprehensive income is an option to the entity and the entity
decides to exercise that option fully knowing the requirements of the standard,
gain or loss on such equity investments should not be allowed to be reclassified in
profit or loss. One of the apprehensions as indicated by the International
Accounting Standards Board and certain regulators is that if gain or loss on such
investments is permitted to be reclassified in profit or loss, the requirement may
lead to structuring of transactions. Therefore, the option of reclassification should
not be allowed. Further, it is argued that certain other Ind ASs also do not permit
reclassification of gain or loss from the other comprehensive income to profit or
loss even at the derecognition of an asset or a liability, e.g., actuarial gains and
losses in accordance with Ind AS 19, Employee Benefits.


   (a) Whether gain or loss on such equity investments should be required to be
       reclassified in profit or loss at the time of derecognition? Yes or no? Why?

   (b) If your answer to (a) is yes, whether in other cases where Indian
       Accounting Standards (Ind ASs) do not permit reclassification in profit or
       loss, whether such reclassification should be required or not? Why?




Question 2:

Paragraph 6.1.3 to this standard provides that an entity may apply hedge
accounting requirements as prescribed in Ind AS 39 for fair value hedge of the
interest rate exposure of a portfolio of financial assets or financial liabilities
instead of this standard.

The Board seeks views of the stakeholders as to what policy should be adopted by
it in this regard in Ind AS 109. One of the views is that the relevant paragraphs of
IAS 39 should be incorporated in the Ind AS 109 as an appendix. It may be noted
that the relevant paragraphs in Ind AS 39, viz., Paragraphs No. 81A, 89-94 and
AG114-AG132, inter alia, provide cross references to various other paragraphs of
Ind AS 39, which in turn provide references to other paragraphs of Ind AS 39.

Accordingly, the Board seeks views of the stakeholders on:

 a)    Whether the option as provided in IFRS 9 to apply hedge accounting
       requirement of IAS 39 should also be given in Ind AS 109? OR only
       permit the hedge accounting requirements under Ind AS 109. Why or why
       not?
 b)   If your answer to (a) above is to allow the option to apply Ind AS 39, what
      strategy do you suggest to be adopted by the Board to include reference to
      Ind AS 39 in Ind AS 109? The following are the possible ways to deal
      with the same:

       (i)    Insert the corresponding requirements of Ind AS 39 in Ind AS 109
              at appropriate places.

       (ii)   Add an Appendix providing the requirements contained in Ind AS
              39 and refer to the Appendix in Ind AS 109 wherever reference to
              Ind AS 39 is stated.

       (iii) Notify Ind AS 39 alongwith Ind AS 109; Ind AS 39 to be applicable
             only in the situation as that provided for in Ind AS 109.

       (iv)   Any other.

In this Exposure Draft, approach as mentioned at (b) (iii) above has been
followed. Accordingly, no changes with respect to reference to Ind AS 39 have
been made.
EXPOSURE DRAFT

INDIAN ACCOUNTING STANDARD 109 FINANCIAL INSTRUMENTS


CONTENTS
                                                      from paragraph
CHAPTERS

1     OBJECTIVE                                              1.1
2.    SCOPE                                                  2.1
3.    RECOGNITION AND DERECOGNITION                          3.1.1
4.    CLASSIFICATION                                         4.1.1
5.    MEASUREMENT                                            5.1.1
6.    HEDGE ACCOUNTING                                       6.1.1

APPENDICES

A Defined terms

B Application guidance

C Amendments to other Standards

D     Hedges of a Net Investment in a Foreign Operation

E     Extinguishing Financial Liabilities with Equity Instruments
                        Exposure Draft
      Indian Accounting Standard (Ind AS) 109
               Financial instruments



Chapter 1 Objective

1.1     The objective of this Standard is to establish principles for the
        financial reporting of financial assets and financial liabilities that will
        present relevant and useful information to users of financial
        statements for their assessment of the amounts, timing and uncertainty
        of an entity's future cash flows.

Chapter 2 Scope

2.1     This Standard shall be applied by all entities to all types of
        financial instruments except:


        (a)    those interests in subsidiaries, associates and joint ventures
               that are accounted for in accordance with Ind AS 110
               Consolidated Financial Statements, Ind AS 27 Separate
               Financial Statements or Ind AS 28 Investments in Associates
               and Joint Ventures. However, in some cases, Ind AS 110,
               Ind AS 27 or Ind AS 28 require or permit an entity to
               account for an interest in a subsidiary, associate or joint
               venture in accordance with some or all of the requirements
               of this Standard. Entities shall also apply this Standard to
               derivatives on an interest in a subsidiary, associate or joint
               venture unless the derivative meets the definition of an
               equity instrument of the entity in Ind AS 32 Financial
               Instruments: Presentation.

        (b)    rights and obligations under leases to which Ind AS 17
               Leases applies. However:

               (i)     lease receivables recognised by a lessor are subject
                       to the derecognition and impairment requirements
              of this Standard;

      (ii)    finance lease payables recognised by a lessee are
              subject to the derecognition requirements of this
              Standard; and

      (iii)   derivatives that are embedded in leases are subject
              to the embedded derivatives requirements of this
              Standard.

(c)   employers' rights and obligations under employee benefit
      plans, to which Ind AS 19 Employee Benefits applies.

(d)   financial instruments issued by the entity that meet the
      definition of an equity instrument in Ind AS 32 (including
      options and warrants) or that are required to be classified
      as an equity instrument in accordance with paragraphs
      16A and 16B or paragraphs 16C and 16D of Ind AS 32.
      However, the holder of such equity instruments shall apply
      this Standard to those instruments, unless they meet the
      exception in (a).

(e)   rights and obligations arising under (i) an insurance
      contract as defined in Ind AS 104 Insurance Contracts,
      other than an issuer's rights and obligations arising under
      an insurance contract that meets the definition of a
      financial guarantee contract, or (ii) a contract that is within
      the scope of Ind AS 104 because it contains a discretionary
      participation feature. However, this Standard applies to a
      derivative that is embedded in a contract within the scope
      of Ind AS 104 if the derivative is not itself a contract within
      the scope of Ind AS 104. Moreover, if an issuer of financial
      guarantee contracts has previously asserted explicitly that
      it regards such contracts as insurance contracts and has
      used accounting that is applicable to insurance contracts,
      the issuer may elect to apply either this Standard or Ind AS
      104 to such financial guarantee contracts (see paragraphs
      B2.5­B2.6). The issuer may make that election contract by
      contract, but the election for each contract is irrevocable.

(f)   any forward contract between an acquirer and a selling
      shareholder to buy or sell an acquiree that will result in a
      business combination within the scope of Ind AS 103
      Business Combinations at a future acquisition date. The
      term of the forward contract should not exceed a
            reasonable period normally necessary to obtain any
            required approvals and to complete the transaction.

      (g)   loan commitments other than those loan commitments
            described in paragraph 2.3. However, an issuer of loan
            commitments shall apply the impairment requirements of
            this Standard to loan commitments that are not otherwise
            within the scope of this Standard. Also, all loan
            commitments are subject to the derecognition
            requirements of this Standard.

      (h)   financial instruments, contracts and obligations under
            share-based payment transactions to which Ind AS 102
            Share-based Payment applies, except for contracts within
            the scope of paragraphs 2.4­2.7 of this Standard to which
            this Standard applies.

      (i)   rights to payments to reimburse the entity for expenditure
            that it is required to make to settle a liability that it
            recognises as a provision in accordance with Ind AS 37
            Provisions, Contingent Liabilities and Contingent Assets, or
            for which, in an earlier period, it recognised a provision in
            accordance with Ind AS 37.

      (j)   rights and obligations within the scope of Ind AS 115
            Revenue from Contracts with Customers that are financial
            instruments, except for those that Ind AS 115 specifies are
            accounted for in accordance with this Standard.

2.2   The impairment requirements of this Standard shall be applied to
      those rights that Ind AS 115 specifies are accounted for in
      accordance with this Standard for the purposes of recognising
      impairment gains or losses.

2.3   The following loan commitments are within the scope of this
      Standard:

      (a)   loan commitments that the entity designates as financial
            liabilities at fair value through profit or loss (see paragraph
            4.2.2). An entity that has a past practice of selling the assets
            resulting from its loan commitments shortly after
            origination shall apply this Standard to all its loan
            commitments in the same class.

      (b)   loan commitments that can be settled net in cash or by
             delivering or issuing another financial instrument. These
             loan commitments are derivatives. A loan commitment is
             not regarded as settled net merely because the loan is paid
             out in instalments (for example, a mortgage construction
             loan that is paid out in instalments in line with the progress
             of construction).

      (c)    commitments to provide a loan at a below-market interest
             rate (see paragraph 4.2.1(d)).

2.4   This Standard shall be applied to those contracts to buy or sell a
      non-financial item that can be settled net in cash or another
      financial instrument, or by exchanging financial instruments, as if
      the contracts were financial instruments, with the exception of
      contracts that were entered into and continue to be held for the
      purpose of the receipt or delivery of a non-financial item in
      accordance with the entity's expected purchase, sale or usage
      requirements. However, this Standard shall be applied to those
      contracts that an entity designates as measured at fair value
      through profit or loss in accordance with paragraph 2.5.

2.5   A contract to buy or sell a non-financial item that can be settled
      net in cash or another financial instrument, or by exchanging
      financial instruments, as if the contract was a financial
      instrument, may be irrevocably designated as measured at fair
      value through profit or loss even if it was entered into for the
      purpose of the receipt or delivery of a non-financial item in
      accordance with the entity's expected purchase, sale or usage
      requirements. This designation is available only at inception of the
      contract and only if it eliminates or significantly reduces a
      recognition inconsistency (sometimes referred to as an
      `accounting mismatch') that would otherwise arise from not
      recognising that contract because it is excluded from the scope of
      this Standard (see paragraph 2.4).

2.6   There are various ways in which a contract to buy or sell a non-
      financial item can be settled net in cash or another financial
      instrument or by exchanging financial instruments. These include:

      (a)    when the terms of the contract permit either party to settle it
             net in cash or another financial instrument or by exchanging
             financial instruments;

      (b)    when the ability to settle net in cash or another financial
             instrument, or by exchanging financial instruments, is not
                 explicit in the terms of the contract, but the entity has a
                 practice of settling similar contracts net in cash or another
                 financial instrument or by exchanging financial instruments
                 (whether with the counterparty, by entering into offsetting
                 contracts or by selling the contract before its exercise or lapse);

          (c)    when, for similar contracts, the entity has a practice of taking
                 delivery of the underlying and selling it within a short period
                 after delivery for the purpose of generating a profit from short-
                 term fluctuations in price or dealer's margin; and

          (d)    when the non-financial item that is the subject of the contract
                 is readily convertible to cash.

          A contract to which (b) or (c) applies is not entered into for the
          purpose of the receipt or delivery of the non-financial item in
          accordance with the entity's expected purchase, sale or usage
          requirements and, accordingly, is within the scope of this Standard.
          Other contracts to which paragraph 2.4 applies are evaluated to
          determine whether they were entered into and continue to be held for
          the purpose of the receipt or delivery of the non-financial item in
          accordance with the entity's expected purchase, sale or usage
          requirements and, accordingly, whether they are within the scope of
          this Standard.

2.7       A written option to buy or sell a non-financial item that can be settled
          net in cash or another financial instrument, or by exchanging financial
          instruments, in accordance with paragraph 2.6(a) or 2.6(d) is within
          the scope of this Standard. Such a contract cannot be entered into for
          the purpose of the receipt or delivery of the non-financial item in
          accordance with the entity's expected purchase, sale or usage
          requirements.



Chapter 3 Recognition and derecognition

3.1 Initial recognition

3.1.1     An entity shall recognise a financial asset or a financial liability in
          its balance sheet when, and only when, the entity becomes party to
          the contractual provisions of the instrument (see paragraphs
          B3.1.1 and B3.1.2). When an entity first recognises a financial
          asset, it shall classify it in accordance with paragraphs 4.1.1­4.1.5
          and measure it in accordance with paragraphs 5.1.1­5.1.3. When
          an entity first recognises a financial liability, it shall classify it in
         accordance with paragraphs 4.2.1 and 4.2.2 and measure it in
         accordance with paragraph 5.1.1.

         Regular way purchase or sale of financial assets

3.1.2    A regular way purchase or sale of financial assets shall be
         recognised and derecognised, as applicable, using trade date
         accounting or settlement date accounting (see paragraphs B3.1.3­
         B3.1.6).

3.2 Derecognition of financial assets

3.2.1    In consolidated financial statements, paragraphs 3.2.2­3.2.9, B3.1.1,
         B3.1.2 and B3.2.1­B3.2.17 are applied at a consolidated level. Hence,
         an entity first consolidates all subsidiaries in accordance with Ind AS
         110 and then applies those paragraphs to the resulting group.

3.2.2    Before evaluating whether, and to what extent, derecognition is
         appropriate under paragraphs 3.2.3­3.2.9, an entity determines
         whether those paragraphs should be applied to a part of a
         financial asset (or a part of a group of similar financial assets) or a
         financial asset (or a group of similar financial assets) in its
         entirety, as follows.

         (a)    Paragraphs 3.2.3­3.2.9 are applied to a part of a financial
                asset (or a part of a group of similar financial assets) if, and
                only if, the part being considered for derecognition meets
                one of the following three conditions.

                (i)    The part comprises only specifically identified cash
                       flows from a financial asset (or a group of similar
                       financial assets). For example, when an entity enters
                       into an interest rate strip whereby the counterparty
                       obtains the right to the interest cash flows, but not the
                       principal cash flows from a debt instrument,
                       paragraphs 3.2.3­3.2.9 are applied to the interest cash
                       flows.

                (ii)   The part comprises only a fully proportionate (pro
                       rata) share of the cash flows from a financial asset (or
                       a group of similar financial assets). For example,
                       when an entity enters into an arrangement whereby
                       the counterparty obtains the rights to a 90 per cent
                       share of all cash flows of a debt instrument,
                       paragraphs 3.2.3­3.2.9 are applied to 90 per cent of
                     those cash flows. If there is more than one
                     counterparty, each counterparty is not required to
                     have a proportionate share of the cash flows provided
                     that the transferring entity has a fully proportionate
                     share.

               (iii) The part comprises only a fully proportionate (pro
                     rata) share of specifically identified cash flows from a
                     financial asset (or a group of similar financial assets).
                     For example, when an entity enters into an
                     arrangement whereby the counterparty obtains the
                     rights to a 90 per cent share of interest cash flows
                     from a financial asset, paragraphs 3.2.3­3.2.9 are
                     applied to 90 per cent of those interest cash flows. If
                     there is more than one counterparty, each
                     counterparty is not required to have a proportionate
                     share of the specifically identified cash flows provided
                     that the transferring entity has a fully proportionate
                     share.

        (b)    In all other cases, paragraphs 3.2.3­3.2.9 are applied to the
               financial asset in its entirety (or to the group of similar
               financial assets in their entirety). For example, when an
               entity transfers (i) the rights to the first or the last 90 per
               cent of cash collections from a financial asset (or a group of
               financial assets), or (ii) the rights to 90 per cent of the cash
               flows from a group of receivables, but provides a guarantee
               to compensate the buyer for any credit losses up to 8 per
               cent of the principal amount of the receivables, paragraphs
               3.2.3­3.2.9 are applied to the financial asset (or a group of
               similar financial assets) in its entirety.

        In paragraphs 3.2.3­3.2.12, the term `financial asset' refers to
        either a part of a financial asset (or a part of a group of similar
        financial assets) as identified in (a) above or, otherwise, a financial
        asset (or a group of similar financial assets) in its entirety.

3.2.3   An entity shall derecognise a financial asset when, and only when:

        (a)    the contractual rights to the cash flows from the financial
               asset expire, or

        (b)    it transfers the financial asset as set out in paragraphs 3.2.4
               and 3.2.5 and the transfer qualifies for derecognition in
               accordance with paragraph 3.2.6.
        (See paragraph 3.1.2 for regular way sales of financial assets.)


3.2.4   An entity transfers a financial asset if, and only if, it either:

        (a)    transfers the contractual rights to receive the cash flows of
               the financial asset, or

        (b)    retains the contractual rights to receive the cash flows of
               the financial asset, but assumes a contractual obligation to
               pay the cash flows to one or more recipients in an
               arrangement that meets the conditions in paragraph 3.2.5.

3.2.5   When an entity retains the contractual rights to receive the cash
        flows of a financial asset (the `original asset'), but assumes a
        contractual obligation to pay those cash flows to one or more
        entities (the `eventual recipients'), the entity treats the transaction
        as a transfer of a financial asset if, and only if, all of the following
        three conditions are met.

        (a)    The entity has no obligation to pay amounts to the eventual
               recipients unless it collects equivalent amounts from the
               original asset. Short-term advances by the entity with the
               right of full recovery of the amount lent plus accrued
               interest at market rates do not violate this condition.

        (b)    The entity is prohibited by the terms of the transfer
               contract from selling or pledging the original asset other
               than as security to the eventual recipients for the obligation
               to pay them cash flows.

        (c)    The entity has an obligation to remit any cash flows it
               collects on behalf of the eventual recipients without
               material delay. In addition, the entity is not entitled to
               reinvest such cash flows, except for investments in cash or
               cash equivalents (as defined in Ind AS 7 Statement of Cash
               Flows) during the short settlement period from the
               collection date to the date of required remittance to the
               eventual recipients, and interest earned on such
               investments is passed to the eventual recipients.

3.2.6   When an entity transfers a financial asset (see paragraph 3.2.4), it
        shall evaluate the extent to which it retains the risks and rewards
        of ownership of the financial asset. In this case:
        (a)    if the entity transfers substantially all the risks and
               rewards of ownership of the financial asset, the entity shall
               derecognise the financial asset and recognise separately as
               assets or liabilities any rights and obligations created or
               retained in the transfer.

        (b)    if the entity retains substantially all the risks and rewards
               of ownership of the financial asset, the entity shall continue
               to recognise the financial asset.

        (c)    if the entity neither transfers nor retains substantially all
               the risks and rewards of ownership of the financial asset,
               the entity shall determine whether it has retained control of
               the financial asset. In this case:

               (i) if the entity has not retained control, it shall
                   derecognise the financial asset and recognise separately
                   as assets or liabilities any rights and obligations
                   created or retained in the transfer.

               (ii) if the entity has retained control, it shall continue to
                    recognise the financial asset to the extent of its
                    continuing involvement in the financial asset (see
                    paragraph 3.2.16).

3.2.7   The transfer of risks and rewards (see paragraph 3.2.6) is evaluated by
        comparing the entity's exposure, before and after the transfer, with the
        variability in the amounts and timing of the net cash flows of the
        transferred asset. An entity has retained substantially all the risks and
        rewards of ownership of a financial asset if its exposure to the
        variability in the present value of the future net cash flows from the
        financial asset does not change significantly as a result of the transfer
        (eg because the entity has sold a financial asset subject to an
        agreement to buy it back at a fixed price or the sale price plus a
        lender's return). An entity has transferred substantially all the risks
        and rewards of ownership of a financial asset if its exposure to such
        variability is no longer significant in relation to the total variability in
        the present value of the future net cash flows associated with the
        financial asset (eg because the entity has sold a financial asset subject
        only to an option to buy it back at its fair value at the time of
        repurchase or has transferred a fully proportionate share of the cash
        flows from a larger financial asset in an arrangement, such as a loan
        sub-participation, that meets the conditions in paragraph 3.2.5).
3.2.8    Often it will be obvious whether the entity has transferred or retained
         substantially all risks and rewards of ownership and there will be no
         need to perform any computations. In other cases, it will be necessary
         to compute and compare the entity's exposure to the variability in the
         present value of the future net cash flows before and after the transfer.
         The computation and comparison are made using as the discount rate
         an appropriate current market interest rate. All reasonably possible
         variability in net cash flows is considered, with greater weight being
         given to those outcomes that are more likely to occur.

3.2.9    Whether the entity has retained control (see paragraph 3.2.6(c)) of the
         transferred asset depends on the transferee's ability to sell the asset. If
         the transferee has the practical ability to sell the asset in its entirety to
         an unrelated third party and is able to exercise that ability unilaterally
         and without needing to impose additional restrictions on the transfer,
         the entity has not retained control. In all other cases, the entity has
         retained control.



         Transfers that qualify for derecognition

3.2.10   If an entity transfers a financial asset in a transfer that qualifies
         for derecognition in its entirety and retains the right to service the
         financial asset for a fee, it shall recognise either a servicing asset
         or a servicing liability for that servicing contract. If the fee to be
         received is not expected to compensate the entity adequately for
         performing the servicing, a servicing liability for the servicing
         obligation shall be recognised at its fair value. If the fee to be
         received is expected to be more than adequate compensation for
         the servicing, a servicing asset shall be recognised for the servicing
         right at an amount determined on the basis of an allocation of the
         carrying amount of the larger financial asset in accordance with
         paragraph 3.2.13.

3.2.11   If, as a result of a transfer, a financial asset is derecognised in its
         entirety but the transfer results in the entity obtaining a new
         financial asset or assuming a new financial liability, or a servicing
         liability, the entity shall recognise the new financial asset,
         financial liability or servicing liability at fair value.

3.2.12   On derecognition of a financial asset in its entirety, the difference
         between:
         (a) the carrying amount (measured at the date of derecognition)
              and
         (b)   the consideration received (including any new asset obtained
               less any new liability assumed)

         shall be recognised in profit or loss.

3.2.13   If the transferred asset is part of a larger financial asset (eg when
         an entity transfers interest cash flows that are part of a debt
         instrument, see paragraph 3.2.2(a)) and the part transferred
         qualifies for derecognition in its entirety, the previous carrying
         amount of the larger financial asset shall be allocated between the
         part that continues to be recognised and the part that is
         derecognised, on the basis of the relative fair values of those parts
         on the date of the transfer. For this purpose, a retained servicing
         asset shall be treated as a part that continues to be recognised.
         The difference between:

         (a)   the carrying amount (measured at the date of derecognition)
               allocated to the part derecognised and

         (b)   the consideration received for the part derecognised
               (including any new asset obtained less any new liability
               assumed)

         shall be recognised in profit or loss.

3.2.14   When an entity allocates the previous carrying amount of a larger
         financial asset between the part that continues to be recognised and
         the part that is derecognised, the fair value of the part that continues to
         be recognised needs to be measured. When the entity has a history of
         selling parts similar to the part that continues to be recognised or other
         market transactions exist for such parts, recent prices of actual
         transactions provide the best estimate of its fair value. When there are
         no price quotes or recent market transactions to support the fair value
         of the part that continues to be recognised, the best estimate of the fair
         value is the difference between the fair value of the larger financial
         asset as a whole and the consideration received from the transferee for
         the part that is derecognised.
         Transfers that do not qualify for derecognition

3.2.15   If a transfer does not result in derecognition because the entity
         has retained substantially all the risks and rewards of ownership
         of the transferred asset, the entity shall continue to recognise the
         transferred asset in its entirety and shall recognise a financial
         liability for the consideration received. In subsequent periods, the
         entity shall recognise any income on the transferred asset and any
         expense incurred on the financial liability.



         Continuing involvement in transferred assets

3.2.16   If an entity neither transfers nor retains substantially all the risks
         and rewards of ownership of a transferred asset, and retains
         control of the transferred asset, the entity continues to recognise
         the transferred asset to the extent of its continuing involvement.
         The extent of the entity's continuing involvement in the
         transferred asset is the extent to which it is exposed to changes in
         the value of the transferred asset. For example:

         (a)   When the entity's continuing involvement takes the form of
               guaranteeing the transferred asset, the extent of the entity's
               continuing involvement is the lower of (i) the amount of the
               asset and (ii) the maximum amount of the consideration
               received that the entity could be required to repay (`the
               guarantee amount').

         (b)   When the entity's continuing involvement takes the form of
               a written or purchased option (or both) on the transferred
               asset, the extent of the entity's continuing involvement is the
               amount of the transferred asset that the entity may
               repurchase. However, in the case of a written put option on
               an asset that is measured at fair value, the extent of the
               entity's continuing involvement is limited to the lower of the
               fair value of the transferred asset and the option exercise
               price (see paragraph B3.2.13).

         (c)   When the entity's continuing involvement takes the form of
               a cash-settled option or similar provision on the transferred
               asset, the extent of the entity's continuing involvement is
               measured in the same way as that which results from non-
               cash settled options as set out in (b) above.

3.2.17   When an entity continues to recognise an asset to the extent of its
         continuing involvement, the entity also recognises an associated
         liability. Despite the other measurement requirements in this
         Standard, the transferred asset and the associated liability are
         measured on a basis that reflects the rights and obligations that
         the entity has retained. The associated liability is measured in
         such a way that the net carrying amount of the transferred asset
         and the associated liability is:

         (a) the amortised cost of the rights and obligations retained by the
             entity, if the transferred asset is measured at amortised cost, or

         (b) equal to the fair value of the rights and obligations retained by
             the entity when measured on a stand-alone basis, if the
             transferred asset is measured at fair value.

3.2.18   The entity shall continue to recognise any income arising on the
         transferred asset to the extent of its continuing involvement and
         shall recognise any expense incurred on the associated liability.

3.2.19   For the purpose of subsequent measurement, recognised changes
         in the fair value of the transferred asset and the associated
         liability are accounted for consistently with each other in
         accordance with paragraph 5.7.1, and shall not be offset.


3.2.20   If an entity's continuing involvement is in only a part of a
         financial asset (eg when an entity retains an option to repurchase
         part of a transferred asset, or retains a residual interest that does
         not result in the retention of substantially all the risks and
         rewards of ownership and the entity retains control), the entity
         allocates the previous carrying amount of the financial asset
         between the part it continues to recognise under continuing
         involvement, and the part it no longer recognises on the basis of
         the relative fair values of those parts on the date of the transfer.
         For this purpose, the requirements of paragraph 3.2.14 apply. The
         difference between:

         (a)   the carrying amount (measured at the date of derecognition)
               allocated to the part that is no longer recognised and

         (b)   the consideration received for the part no longer recognised
               shall be recognised in profit or loss.

3.2.21   If the transferred asset is measured at amortised cost, the option in this
         Standard to designate a financial liability as at fair value through
           profit or loss is not applicable to the associated liability.



           All transfers

3.2.22     If a transferred asset continues to be recognised, the asset and the
           associated liability shall not be offset. Similarly, the entity shall
           not offset any income arising from the transferred asset with any
           expense incurred on the associated liability (see paragraph 42 of
           Ind AS 32).

3.2.23     If a transferor provides non-cash collateral (such as debt or equity
           instruments) to the transferee, the accounting for the collateral by
           the transferor and the transferee depends on whether the
           transferee has the right to sell or repledge the collateral and on
           whether the transferor has defaulted. The transferor and
           transferee shall account for the collateral as follows:

           (a)   If the transferee has the right by contract or custom to sell
                 or repledge the collateral, then the transferor shall reclassify
                 that asset in its balance sheet (eg as a loaned asset, pledged
                 equity instruments or repurchase receivable) separately
                 from other assets.

           (b)   If the transferee sells collateral pledged to it, it shall
                 recognise the proceeds from the sale and a liability measured
                 at fair value for its obligation to return the collateral.

           (c)   If the transferor defaults under the terms of the contract
                 and is no longer entitled to redeem the collateral, it shall
                 derecognise the collateral, and the transferee shall recognise
                 the collateral as its asset initially measured at fair value or, if
                 it has already sold the collateral, derecognise its obligation to
                 return the collateral.

           (d)   Except as provided in (c), the transferor shall continue to
                 carry the collateral as its asset, and the transferee shall not
                 recognise the collateral as an asset.



3.3      Derecognition of financial liabilities

3.3.1      An entity shall remove a financial liability (or a part of a financial
           liability) from its balance sheet when, and only when, it is
           extinguished--ie when the obligation specified in the contract is
          discharged or cancelled or expires.

3.3.2     An exchange between an existing borrower and lender of debt
          instruments with substantially different terms shall be accounted
          for as an extinguishment of the original financial liability and the
          recognition of a new financial liability. Similarly, a substantial
          modification of the terms of an existing financial liability or a part
          of it (whether or not attributable to the financial difficulty of the
          debtor) shall be accounted for as an extinguishment of the original
          financial liability and the recognition of a new financial liability.

3.3.3     The difference between the carrying amount of a financial liability
          (or part of a financial liability) extinguished or transferred to
          another party and the consideration paid, including any non-cash
          assets transferred or liabilities assumed, shall be recognised in
          profit or loss.

3.3.4     If an entity repurchases a part of a financial liability, the entity shall
          allocate the previous carrying amount of the financial liability
          between the part that continues to be recognised and the part that is
          derecognised based on the relative fair values of those parts on the
          date of the repurchase. The difference between (a) the carrying
          amount allocated to the part derecognised and (b) the consideration
          paid, including any non-cash assets transferred or liabilities assumed,
          for the part derecognised shall be recognised in profit or loss.




Chapter 4 Classification

4.1 Classification of financial assets

4.1.1     Unless paragraph 4.1.5 applies, an entity shall classify financial
          assets as subsequently measured at amortised cost, fair value
          through other comprehensive income or fair value through profit
          or loss on the basis of both:

          (a)   the entity's business model for managing the financial assets
                and

          (b)   the contractual cash flow characteristics of the financial
                asset.

4.1.2     A financial asset shall be measured at amortised cost if both of the
          following conditions are met:
         (a)   the financial asset is held within a business model whose
               objective is to hold financial assets in order to collect
               contractual cash flows and

         (b)   the contractual terms of the financial asset give rise on
               specified dates to cash flows that are solely payments of
               principal and interest on the principal amount outstanding.

         Paragraphs B4.1.1­B4.1.26 provide guidance on how to apply
         these conditions.

4.1.2A   A financial asset shall be measured at fair value through other
         comprehensive income if both of the following conditions are met:

         (a)   the financial asset is held within a business model whose
               objective is achieved by both collecting contractual cash
               flows and selling financial assets and

         (b)   the contractual terms of the financial asset give rise on
               specified dates to cash flows that are solely payments of
               principal and interest on the principal amount outstanding.

         Paragraphs B4.1.1­B4.1.26 provide guidance on how to apply
         these conditions.

4.1.3    For the purpose of applying paragraphs 4.1.2(b) and 4.1.2A(b):

         (a)   principal is the fair value of the financial asset at initial
               recognition. Paragraph B4.1.7B provides additional
               guidance on the meaning of principal.

         (b)   interest consists of consideration for the time value of
               money, for the credit risk associated with the principal
               amount outstanding during a particular period of time and
               for other basic lending risks and costs, as well as a profit
               margin. Paragraphs B4.1.7A and B4.1.9A­B4.1.9E provide
               additional guidance on the meaning of interest, including the
               meaning of the time value of money.

4.1.4    A financial asset shall be measured at fair value through profit or
         loss unless it is measured at amortised cost in accordance with
         paragraph 4.1.2 or at fair value through other comprehensive
         income in accordance with paragraph 4.1.2A. However an entity
         may make an irrevocable election at initial recognition for
          particular investments in equity instruments that would otherwise
          be measured at fair value through profit or loss to present
          subsequent changes in fair value in other comprehensive income
          (see paragraphs 5.7.5­5.7.6).



        Option to designate a financial asset at fair value
        through profit or loss

4.1.5     Despite paragraphs 4.1.1­4.1.4, an entity may, at initial
          recognition, irrevocably designate a financial asset as measured at
          fair value through profit or loss if doing so eliminates or
          significantly reduces a measurement or recognition inconsistency
          (sometimes referred to as an `accounting mismatch') that would
          otherwise arise from measuring assets or liabilities or recognising
          the gains and losses on them on different bases (see paragraphs
          B4.1.29­B4.1.32).



4.2 Classification of financial liabilities

4.2.1     An entity shall classify all financial liabilities as subsequently
          measured at amortised cost, except for:

          (a)   financial liabilities at fair value through profit or loss. Such
                liabilities, including derivatives that are liabilities, shall be
                subsequently measured at fair value.

          (b)   financial liabilities that arise when a transfer of a financial
                asset does not qualify for derecognition or when the
                continuing involvement approach applies. Paragraphs 3.2.15
                and 3.2.17 apply to the measurement of such financial
                liabilities.

          (c)   financial guarantee contracts. After initial recognition, an
                issuer of such a contract shall (unless paragraph 4.2.1(a) or
                (b) applies) subsequently measure it at the higher of:

                (i) the amount of the loss allowance determined in
                    accordance with Section 5.5 and

                (ii) the amount initially recognised (see paragraph 5.1.1)
                     less, when appropriate, the cumulative amount of
                     income recognised in accordance with the principles of
                    Ind AS 115.

          (d)   commitments to provide a loan at a below-market interest
                rate. An issuer of such a commitment shall (unless
                paragraph 4.2.1(a) applies) subsequently measure it at the
                higher of:

                (i) the amount of the loss allowance determined in
                    accordance with Section 5.5 and

                (ii) the amount initially recognised (see paragraph 5.1.1)
                     less, when appropriate, the cumulative amount of
                     income recognised in accordance with the principles of
                     Ind AS 115.

          (e)   contingent consideration recognised by an acquirer in a
                business combination to which Ind AS 103 applies. Such
                contingent consideration shall subsequently be measured at
                fair value with changes recognised in profit or loss.

        Option to designate a financial liability at fair value
        through profit or loss

4.2.2     An entity may, at initial recognition, irrevocably designate a
          financial liability as measured at fair value through profit or loss
          when permitted by paragraph 4.3.5, or when doing so results in
          more relevant information, because either:

          (a)   it eliminates or significantly reduces a measurement or
                recognition inconsistency (sometimes referred to as `an
                accounting mismatch') that would otherwise arise from
                measuring assets or liabilities or recognising the gains and
                losses on them on different bases (see paragraphs B4.1.29­
                B4.1.32); or
          (b)   a group of financial liabilities or financial assets and
                financial liabilities is managed and its performance is
                evaluated on a fair value basis, in accordance with a
                documented risk management or investment strategy, and
                information about the group is provided internally on that
                basis to the entity's key management personnel (as defined
                in Ind AS 24 Related Party Disclosures), for example, the
                entity's board of directors and chief executive officer (see
                paragraphs B4.1.33­B4.1.36).




4.3 Embedded derivatives
4.3.1     An embedded derivative is a component of a hybrid contract that also
          includes a non-derivative host--with the effect that some of the cash
          flows of the combined instrument vary in a way similar to a stand-
          alone derivative. An embedded derivative causes some or all of the
          cash flows that otherwise would be required by the contract to be
          modified according to a specified interest rate, financial instrument
          price, commodity price, foreign exchange rate, index of prices or
          rates, credit rating or credit index, or other variable, provided in the
          case of a non-financial variable that the variable is not specific to a
          party to the contract. A derivative that is attached to a financial
          instrument but is contractually transferable independently of that
          instrument, or has a different counterparty, is not an embedded
          derivative, but a separate financial instrument.

          Hybrid contracts with financial asset hosts

4.3.2     If a hybrid contract contains a host that is an asset within the
          scope of this Standard, an entity shall apply the requirements
          in paragraphs 4.1.1­4.1.5 to the entire hybrid contract.

        Other hybrid contracts

4.3.3     If a hybrid contract contains a host that is not an asset within the
          scope of this Standard, an embedded derivative shall be separated
          from the host and accounted for as a derivative under this
          Standard if, and only if:

          (a)   the economic characteristics and risks of the embedded
                derivative are not closely related to the economic
                characteristics and risks of the host (see paragraphs B4.3.5
                and B4.3.8);

          (b)   a separate instrument with the same terms as the embedded
                derivative would meet the definition of a derivative; and

          (c)   the hybrid contract is not measured at fair value with
                changes in fair value recognised in profit or loss (ie a
                derivative that is embedded in a financial liability at fair
                value through profit or loss is not separated).

4.3.4     If an embedded derivative is separated, the host contract shall be
          accounted for in accordance with the appropriate Standards. This
          Standard does not address whether an embedded derivative shall
          be presented separately in the balance sheet.
4.3.5   Despite paragraphs 4.3.3 and 4.3.4, if a contract contains one or
        more embedded derivatives and the host is not an asset within the
        scope of this Standard, an entity may designate the entire hybrid
        contract as at fair value through profit or loss unless:

        (a)   the embedded derivative(s) do(es) not significantly modify
              the cash flows that otherwise would be required by the
              contract; or

        (b)   it is clear with little or no analysis when a similar hybrid
              instrument is first considered that separation of the
              embedded derivative(s) is prohibited, such as a prepayment
              option embedded in a loan that permits the holder to prepay
              the loan for approximately its amortised cost.

4.3.6   If an entity is required by this Standard to separate an embedded
        derivative from its host, but is unable to measure the embedded
        derivative separately either at acquisition or at the end of a
        subsequent financial reporting period, it shall designate the entire
        hybrid contract as at fair value through profit or loss.

4.3.7   If an entity is unable to measure reliably the fair value of an embedded
        derivative on the basis of its terms and conditions, the fair value of the
        embedded derivative is the difference between the fair value of the
        hybrid contract and the fair value of the host. If the entity is unable to
        measure the fair value of the embedded derivative using this method,
        paragraph 4.3.6 applies and the hybrid contract is designated as at fair
        value through profit or loss.

4.4 Reclassification

4.4.1   When, and only when, an entity changes its business model for
        managing financial assets it shall reclassify all affected financial
        assets in accordance with paragraphs 4.1.1­4.1.4. See paragraphs
        5.6.1­5.6.7, B4.4.1­B4.4.3 and B5.6.1­B5.6.2 for additional
        guidance on reclassifying financial assets.

4.4.2   An entity shall not reclassify any financial liability.

4.4.3   The following changes in circumstances are not reclassifications for
        the purposes of paragraphs 4.4.1­4.4.2:

        (a)   an item that was previously a designated and effective hedging
              instrument in a cash flow hedge or net investment hedge no
               longer qualifies as such;

         (b)   an item becomes a designated and effective hedging instrument
               in a cash flow hedge or net investment hedge; and

         (c)   changes in measurement in accordance with Section 6.7.

Chapter 5 Measurement

5.1 Initial measurement

5.1.1    Except for trade receivables within the scope of paragraph 5.1.3,
         at initial recognition, an entity shall measure a financial asset or
         financial liability at its fair value plus or minus, in the case of a
         financial asset or financial liability not at fair value through profit
         or loss, transaction costs that are directly attributable to the
         acquisition or issue of the financial asset or financial liability.

5.1.1A   However, if the fair value of the financial asset or financial
         liability at initial recognition differs from the transaction price, an
         entity shall apply paragraph B5.1.2A.

5.1.2    When an entity uses settlement date accounting for an asset that is
         subsequently measured at amortised cost, the asset is recognised
         initially at its fair value on the trade date (see paragraphs B3.1.3­
         B3.1.6).

5.1.3    Despite the requirement in paragraph 5.1.1, at initial recognition, an
         entity shall measure trade receivables that do not have a significant
         financing component (determined in accordance with Ind AS 115) at
         their transaction price (as defined in Ind AS 115).

5.2 Subsequent measurement of financial assets

5.2.1    After initial recognition, an entity shall measure a financial asset
         in accordance with paragraphs 4.1.1­4.1.5 at:

         (a)   amortised cost;

         (b)   fair value through other comprehensive income; or

         (c)   fair value through profit or loss.

5.2.2    An entity shall apply the impairment requirements in Section 5.5
           to financial assets that are measured at amortised cost in
           accordance with paragraph 4.1.2 and to financial assets that are
           measured at fair value through other comprehensive income in
           accordance with paragraph 4.1.2A.

5.2.3      An entity shall apply the hedge accounting requirements in
           paragraphs 6.5.8­6.5.14 (and, if applicable, paragraphs 89­94 of
           Ind AS 39 for the fair value hedge accounting for a portfolio
           hedge of interest rate risk) to a financial asset that is designated as
           a hedged item.

5.3 Subsequent measurement of financial liabilities

5.3.1      After initial recognition, an entity shall measure a financial
           liability in accordance with paragraphs 4.2.1­4.2.2.

5.3.2      An entity shall apply the hedge accounting requirements in
           paragraphs 6.5.8­6.5.14 (and, if applicable, paragraphs 89­94 of
           Ind AS 39 for the fair value hedge accounting for a portfolio
           hedge of interest rate risk) to a financial liability that is designated
           as a hedged item.

5.4 Amortised cost measurement

        Financial assets
        Effective interest method

5.4.1      Interest revenue shall be calculated by using the effective interest
           method (see Appendix A and paragraphs B5.4.1­B5.4.7). This
           shall be calculated by applying the effective interest rate to the
           gross carrying amount of a financial asset except for:

           (a) purchased or originated credit-impaired financial assets. For
               those financial assets, the entity shall apply the credit-adjusted
               effective interest rate to the amortised cost of the financial asset
               from initial recognition.

           (b) financial assets that are not purchased or originated credit-
               impaired financial assets but subsequently have become
               credit-impaired financial assets. For those financial assets, the
               entity shall apply the effective interest rate to the amortised
               cost of the financial asset in subsequent reporting periods.

5.4.2      An entity that, in a reporting period, calculates interest revenue by
           applying the effective interest method to the amortised cost of a
          financial asset in accordance with paragraph 5.4.1(b), shall, in
          subsequent reporting periods, calculate the interest revenue by
          applying the effective interest rate to the gross carrying amount if the
          credit risk on the financial instrument improves so that the financial
          asset is no longer credit-impaired and the improvement can be related
          objectively to an event occurring after the requirements in paragraph
          5.4.1(b) were applied (such as an improvement in the borrower's
          credit rating).

        Modification of contractual cash flows

5.4.3     When the contractual cash flows of a financial asset are renegotiated
          or otherwise modified and the renegotiation or modification does not
          result in the derecognition of that financial asset in accordance with
          this Standard, an entity shall recalculate the gross carrying amount of
          the financial asset and shall recognise a modification gain or loss in
          profit or loss. The gross carrying amount of the financial asset shall be
          recalculated as the present value of the renegotiated or modified
          contractual cash flows that are discounted at the financial asset's
          original effective interest rate (or credit-adjusted effective interest rate
          for purchased or originated credit-impaired financial assets) or, when
          applicable, the revised effective interest rate calculated in accordance
          with paragraph 6.5.10. Any costs or fees incurred adjust the carrying
          amount of the modified financial asset and are amortised over the
          remaining term of the modified financial asset.

        Write-off

5.4.4     An entity shall directly reduce the gross carrying amount of a
          financial asset when the entity has no reasonable expectations of
          recovering a financial asset in its entirety or a portion thereof. A
          write-off constitutes a derecognition event (see paragraph
          B3.2.16(r)).

5.5 Impairment

        Recognition of expected credit losses
        General approach

5.5.1     An entity shall recognise a loss allowance for expected credit losses
          on a financial asset that is measured in accordance with
          paragraphs 4.1.2 or 4.1.2A, a lease receivable, a contract asset or a
          loan commitment and a financial guarantee contract to which the
          impairment requirements apply in accordance with paragraphs
          2.1(g), 4.2.1(c) or 4.2.1(d).
5.5.2     An entity shall apply the impairment requirements for the recognition
          and measurement of a loss allowance for financial assets that are
          measured at fair value through other comprehensive income in
          accordance with paragraph 4.1.2A. However, the loss allowance shall
          be recognised in other comprehensive income and shall not reduce the
          carrying amount of the financial asset in the balance sheet.

5.5.3     Subject to paragraphs 5.5.13­5.5.16, at each reporting date, an
          entity shall measure the loss allowance for a financial instrument
          at an amount equal to the lifetime expected credit losses if the
          credit risk on that financial instrument has increased significantly
          since initial recognition.

5.5.4     The objective of the impairment requirements is to recognise lifetime
          expected credit losses for all financial instruments for which there
          have been significant increases in credit risk since initial recognition -
          whether assessed on an individual or collective basis - considering all
          reasonable and supportable information, including that which is
          forward-looking.

5.5.5     Subject to paragraphs 5.5.13­5.5.16, if, at the reporting date, the
          credit risk on a financial instrument has not increased
          significantly since initial recognition, an entity shall measure the
          loss allowance for that financial instrument at an amount equal to
          12-month expected credit losses.

5.5.6     For loan commitments and financial guarantee contracts, the date that
          the entity becomes a party to the irrevocable commitment shall be
          considered to be the date of initial recognition for the purposes of
          applying the impairment requirements.

5.5.7     If an entity has measured the loss allowance for a financial instrument
          at an amount equal to lifetime expected credit losses in the previous
          reporting period, but determines at the current reporting date that
          paragraph 5.5.3 is no longer met, the entity shall measure the loss
          allowance at an amount equal to 12-month expected credit losses at
          the current reporting date.

5.5.8     An entity shall recognise in profit or loss, as an impairment gain or
          loss, the amount of expected credit losses (or reversal) that is required
          to adjust the loss allowance at the reporting date to the amount that is
          required to be recognised in accordance with this Standard.

        Determining significant increases in credit risk
5.5.9      At each reporting date, an entity shall assess whether the credit risk on
           a financial instrument has increased significantly since initial
           recognition. When making the assessment, an entity shall use the
           change in the risk of a default occurring over the expected life of the
           financial instrument instead of the change in the amount of expected
           credit losses. To make that assessment, an entity shall compare the
           risk of a default occurring on the financial instrument as at the
           reporting date with the risk of a default occurring on the financial
           instrument as at the date of initial recognition and consider reasonable
           and supportable information, that is available without undue cost or
           effort, that is indicative of significant increases in credit risk since
           initial recognition.

5.5.10     An entity may assume that the credit risk on a financial instrument has
           not increased significantly since initial recognition if the financial
           instrument is determined to have low credit risk at the reporting
           date (see paragraphs B5.5.22 B5.5.24).

5.5.11     If reasonable and supportable forward-looking information is
           available without undue cost or effort, an entity cannot rely solely on
           past due information when determining whether credit risk has
           increased significantly since initial recognition. However, when
           information that is more forward-looking than past due status (either
           on an individual or a collective basis) is not available without undue
           cost or effort, an entity may use past due information to determine
           whether there have been significant increases in credit risk since initial
           recognition. Regardless of the way in which an entity assesses
           significant increases in credit risk, there is a rebuttable presumption
           that the credit risk on a financial asset has increased significantly since
           initial recognition when contractual payments are more than 30 days
           past due. An entity can rebut this presumption if the entity has
           reasonable and supportable information that is available without
           undue cost or effort, that demonstrates that the credit risk has not
           increased significantly since initial recognition even though the
           contractual payments are more than 30 days past due. When an entity
           determines that there have been significant increases in credit risk
           before contractual payments are more than 30 days past due, the
           rebuttable presumption does not apply.



         Modified financial assets
5.5.12     If the contractual cash flows on a financial asset have been
           renegotiated or modified and the financial asset was not derecognised,
           an entity shall assess whether there has been a significant increase in
           the credit risk of the financial instrument in accordance with
           paragraph 5.5.3 by comparing:

           (a)   the risk of a default occurring at the reporting date (based on the
                 modified contractual terms); and

           (b)   the risk of a default occurring at initial recognition (based on the
                 original, unmodified contractual terms).

         Purchased or originated credit-impaired financial assets

5.5.13     Despite paragraphs 5.5.3 and 5.5.5, at the reporting date, an entity
           shall only recognise the cumulative changes in lifetime expected
           credit losses since initial recognition as a loss allowance for
           purchased or originated credit-impaired financial assets.

5.5.14     At each reporting date, an entity shall recognise in profit or loss the
           amount of the change in lifetime expected credit losses as an
           impairment gain or loss. An entity shall recognise favourable changes
           in lifetime expected credit losses as an impairment gain, even if the
           lifetime expected credit losses are less than the amount of expected
           credit losses that were included in the estimated cash flows on initial
           recognition.

         Simplified approach for trade receivables, contract
         assets and lease receivables

5.5.15     Despite paragraphs 5.5.3 and 5.5.5, an entity shall always measure
           the loss allowance at an amount equal to lifetime expected credit
           losses for:

           (a)   trade receivables or contract assets that result from
                 transactions that are within the scope of Ind AS 115, and
                 that:

                 (i) do not contain a significant financing component (or
                     when the entity applies the practical expedient for
                     contracts that are one year or less) in accordance with
                     Ind AS 115; or

                 (ii) contain a significant financing component in accordance
                      with Ind AS 115, if the entity chooses as its accounting
                      policy to measure the loss allowance at an amount equal
                      to lifetime expected credit losses. That accounting policy
                      shall be applied to all such trade receivables or contract
                     assets but may be applied separately to trade receivables
                     and contract assets.

           (b)   lease receivables that result from transactions that are
                 within the scope of Ind AS 17, if the entity chooses as its
                 accounting policy to measure the loss allowance at an
                 amount equal to lifetime expected credit losses. That
                 accounting policy shall be applied to all lease receivables but
                 may be applied separately to finance and operating lease
                 receivables.

5.5.16     An entity may select its accounting policy for trade receivables, lease
           receivables and contract assets independently of each other.

         Measurement of expected credit losses

5.5.17     An entity shall measure expected credit losses of a financial
           instrument in a way that reflects:

           (a)   an unbiased and probability-weighted amount that is
                 determined by evaluating a range of possible outcomes;

           (b)   the time value of money; and

           (c)   reasonable and supportable information that is available
                 without undue cost or effort at the reporting date about past
                 events, current conditions and forecasts of future economic
                 conditions.

5.5.18     When measuring expected credit losses, an entity need not necessarily
           identify every possible scenario. However, it shall consider the risk or
           probability that a credit loss occurs by reflecting the possibility that a
           credit loss occurs and the possibility that no credit loss occurs, even if
           the possibility of a credit loss occurring is very low.

5.5.19     The maximum period to consider when measuring expected credit
           losses is the maximum contractual period (including extension
           options) over which the entity is exposed to credit risk and not a
           longer period, even if that longer period is consistent with business
           practice.

5.5.20     However, some financial instruments include both a loan and an
           undrawn commitment component and the entity's contractual ability
           to demand repayment and cancel the undrawn commitment does not
           limit the entity's exposure to credit losses to the contractual notice
          period. For such financial instruments, and only those financial
          instruments, the entity shall measure expected credit losses over the
          period that the entity is exposed to credit risk and expected credit
          losses would not be mitigated by credit risk management actions, even
          if that period extends beyond the maximum contractual period.

5.6 Reclassification of financial assets


5.6.1     If an entity reclassifies financial assets in accordance with
          paragraph 4.4.1, it shall apply the reclassification prospectively
          from the reclassification date. The entity shall not restate any
          previously recognised gains, losses (including impairment gains
          or losses) or interest. Paragraphs 5.6.2­5.6.7 set out the
          requirements for reclassifications.

5.6.2     If an entity reclassifies a financial asset out of the amortised cost
          measurement category and into the fair value through profit or
          loss measurement category, its fair value is measured at the
          reclassification date. Any gain or loss arising from a difference
          between the previous amortised cost of the financial asset and fair
          value is recognised in profit or loss.

5.6.3     If an entity reclassifies a financial asset out of the fair value
          through profit or loss measurement category and into the
          amortised cost measurement category, its fair value at the
          reclassification date becomes its new gross carrying amount. (See
          paragraph B5.6.2 for guidance on determining an effective
          interest rate and a loss allowance at the reclassification date.)

5.6.4     If an entity reclassifies a financial asset out of the amortised cost
          measurement category and into the fair value through other
          comprehensive income measurement category, its fair value is
          measured at the reclassification date. Any gain or loss arising
          from a difference between the previous amortised cost of the
          financial asset and fair value is recognised in other comprehensive
          income. The effective interest rate and the measurement of
          expected credit losses are not adjusted as a result of the
          reclassification. (See paragraph B5.6.1.)

5.6.5     If an entity reclassifies a financial asset out of the fair value
          through other comprehensive income measurement category and
          into the amortised cost measurement category, the financial asset
          is reclassified at its fair value at the reclassification date. However,
          the cumulative gain or loss previously recognised in other
         comprehensive income is removed from equity and adjusted
         against the fair value of the financial asset at the reclassification
         date. As a result, the financial asset is measured at the
         reclassification date as if it had always been measured at
         amortised cost. This adjustment affects other comprehensive
         income but does not affect profit or loss and therefore is not a
         reclassification adjustment (see Ind AS 1 Presentation of Financial
         Statements). The effective interest rate and the measurement of
         expected credit losses are not adjusted as a result of the
         reclassification. (See paragraph B5.6.1.)

5.6.6    If an entity reclassifies a financial asset out of the fair value
         through profit or loss measurement category and into the fair
         value through other comprehensive income measurement
         category, the financial asset continues to be measured at fair
         value. (See paragraph B5.6.2 for guidance on determining an
         effective interest rate and a loss allowance at the reclassification
         date.)

5.6.7    If an entity reclassifies a financial asset out of the fair value
         through other comprehensive income measurement category and
         into the fair value through profit or loss measurement category,
         the financial asset continues to be measured at fair value. The
         cumulative gain or loss previously recognised in other
         comprehensive income is reclassified from equity to profit or loss
         as a reclassification adjustment (see Ind AS 1) at the
         reclassification date.

5.7 Gains and losses

5.7.1    A gain or loss on a financial asset or financial liability that is
         measured at fair value shall be recognised in profit or loss unless:

         (a)   it is part of a hedging relationship (see paragraphs 6.5.8­
               6.5.14 and, if applicable, paragraphs 89­94 of Ind AS 39 for
               the fair value hedge accounting for a portfolio hedge of
               interest rate risk);

         (b)   it is an investment in an equity instrument and the entity has
               elected to present gains and losses on that investment in
               other comprehensive income in accordance with paragraph
               5.7.5;

         (c)   it is a financial liability designated as at fair value through
               profit or loss and the entity is required to present the effects
               of changes in the liability's credit risk in other
               comprehensive income in accordance with paragraph 5.7.7;
               or

         (d)   it is a financial asset measured at fair value through other
               comprehensive income in accordance with paragraph 4.1.2A
               and the entity is required to recognise some changes in fair
               value in other comprehensive income in accordance with
               paragraph 5.7.10.

5.7.1A   Dividends are recognised in profit or loss only when:

         (a)   the entity's right to receive payment of the dividend is
               established;
         (b)   it is probable that the economic benefits associated with the
               dividend will flow to the entity; and
         (c)   the amount of the dividend can be measured reliably.

5.7.2    A gain or loss on a financial asset that is measured at amortised
         cost and is not part of a hedging relationship (see paragraphs
         6.5.8­6.5.14 and, if applicable, paragraphs 89­94 of Ind AS 39 for
         the fair value hedge accounting for a portfolio hedge of interest
         rate risk)) shall be recognised in profit or loss when the financial
         asset is derecognised, reclassified in accordance with paragraph
         5.6.2, through the amortisation process or in order to recognise
         impairment gains or losses. An entity shall apply paragraphs 5.6.2
         and 5.6.4 if it reclassifies financial assets out of the amortised cost
         measurement category. A gain or loss on a financial liability that
         is measured at amortised cost and is not part of a hedging
         relationship (see paragraphs 6.5.8­6.5.14 and, if applicable,
         paragraphs 89­94 of Ind AS 39 for the fair value hedge
         accounting for a portfolio hedge of interest rate risk) shall be
         recognised in profit or loss when the financial liability is
         derecognised and through the amortisation process. (See
         paragraph B5.7.2 for guidance on foreign exchange gains or
         losses.)

5.7.3    A gain or loss on financial assets or financial liabilities that are
         hedged items in a hedging relationship shall be recognised in
         accordance with paragraphs 6.5.8­6.5.14 and, if applicable,
         paragraphs 89­94 of Ind AS 39 for the fair value hedge
         accounting for a portfolio hedge of interest rate risk.

5.7.4    If an entity recognises financial assets using settlement date
         accounting (see paragraphs 3.1.2, B3.1.3 and B3.1.6), any change
          in the fair value of the asset to be received during the period
          between the trade date and the settlement date is not recognised
          for assets measured at amortised cost. For assets measured at fair
          value, however, the change in fair value shall be recognised in
          profit or loss or in other comprehensive income, as appropriate in
          accordance with paragraph 5.7.1. The trade date shall be
          considered the date of initial recognition for the purposes of
          applying the impairment requirements.

        Investments in equity instruments

5.7.5     At initial recognition, an entity may make an irrevocable election
          to present in other comprehensive income subsequent changes in
          the fair value of an investment in an equity instrument within the
          scope of this Standard that is neither held for trading nor
          contingent consideration recognised by an acquirer in a business
          combination to which Ind AS 103 applies. (See paragraph B5.7.3
          for guidance on foreign exchange gains or losses.)

5.7.6     If an entity makes the election in paragraph 5.7.5, it shall recognise in
          profit or loss dividends from that investment in accordance with
          paragraph 5.7.1A.

        Liabilities designated as at fair value through profit or loss

5.7.7     An entity shall present a gain or loss on a financial liability that is
          designated as at fair value through profit or loss in accordance
          with paragraph 4.2.2 or paragraph 4.3.5 as follows:

          (a)   The amount of change in the fair value of the financial
                liability that is attributable to changes in the credit risk of
                that liability shall be presented in other comprehensive
                income (see paragraphs B5.7.13­B5.7.20), and

          (b)   the remaining amount of change in the fair value of the
                liability shall be presented in profit or loss

          unless the treatment of the effects of changes in the liability's
          credit risk described in (a) would create or enlarge an accounting
          mismatch in profit or loss (in which case paragraph 5.7.8 applies).
          Paragraphs B5.7.5­B5.7.7 and B5.7.10­B5.7.12 provide guidance
          on determining whether an accounting mismatch would be
          created or enlarged.

5.7.8     If the requirements in paragraph 5.7.7 would create or enlarge an
           accounting mismatch in profit or loss, an entity shall present all
           gains or losses on that liability (including the effects of changes in
           the credit risk of that liability) in profit or loss.

5.7.9      Despite the requirements in paragraphs 5.7.7 and 5.7.8, an entity shall
           present in profit or loss all gains and losses on loan commitments and
           financial guarantee contracts that are designated as at fair value
           through profit or loss.

         Assets measured at fair value through other comprehensive
         income

5.7.10     A gain or loss on a financial asset measured at fair value through
           other comprehensive income in accordance with paragraph 4.1.2A
           shall be recognised in other comprehensive income, except for
           impairment gains or losses (see Section 5.5) and foreign exchange
           gains and losses (see paragraphs B5.7.2­B5.7.2A), until the
           financial asset is derecognised or reclassified. When the financial
           asset is derecognised the cumulative gain or loss previously
           recognised in other comprehensive income is reclassified from
           equity to profit or loss as a reclassification adjustment (see Ind
           AS 1). If the financial asset is reclassified out of the fair value
           through other comprehensive income measurement category, the
           entity shall account for the cumulative gain or loss that was
           previously recognised in other comprehensive income in
           accordance with paragraphs 5.6.5 and 5.6.7. Interest calculated
           using the effective interest method is recognised in profit or loss.

5.7.11     As described in paragraph 5.7.10, if a financial asset is measured
           at fair value through other comprehensive income in accordance
           with paragraph 4.1.2A, the amounts that are recognised in profit
           or loss are the same as the amounts that would have been
           recognised in profit or loss if the financial asset had been
           measured at amortised cost.

Chapter 6 Hedge accounting

6.1 Objective and scope of hedge accounting

6.1.1      The objective of hedge accounting is to represent, in the financial
           statements, the effect of an entity's risk management activities that use
           financial instruments to manage exposures arising from particular
           risks that could affect profit or loss (or other comprehensive income,
           in the case of investments in equity instruments for which an entity
           has elected to present changes in fair value in other comprehensive
          income in accordance with paragraph 5.7.5). This approach aims to
          convey the context of hedging instruments for which hedge
          accounting is applied in order to allow insight into their purpose and
          effect.

6.1.2     An entity may choose to designate a hedging relationship between a
          hedging instrument and a hedged item in accordance with paragraphs
          6.2.1­6.3.7 and B6.2.1­B6.3.25. For hedging relationships that meet
          the qualifying criteria, an entity shall account for the gain or loss on
          the hedging instrument and the hedged item in accordance with
          paragraphs 6.5.1­6.5.14 and B6.5.1­B6.5.28. When the hedged item
          is a group of items, an entity shall comply with the additional
          requirements in paragraphs 6.6.1­6.6.6 and B6.6.1­B6.6.16.

6.1.3     For a fair value hedge of the interest rate exposure of a portfolio of
          financial assets or financial liabilities (and only for such a hedge), an
          entity may apply the hedge accounting requirements in Ind AS 39
          instead of those in this Standard. In that case, the entity must also
          apply the specific requirements for the fair value hedge accounting for
          a portfolio hedge of interest rate risk and designate as the hedged item
          a portion that is a currency amount (see paragraphs 81A, 89A and
          AG114­AG132 of Ind AS 39).



6.2 Hedging instruments

        Qualifying instruments

6.2.1     A derivative measured at fair value through profit or loss may be
          designated as a hedging instrument, except for some written
          options (see paragraph B6.2.4).

6.2.2     A non-derivative financial asset or a non-derivative financial
          liability measured at fair value through profit or loss may be
          designated as a hedging instrument unless it is a financial liability
          designated as at fair value through profit or loss for which the
          amount of its change in fair value that is attributable to changes in
          the credit risk of that liability is presented in other comprehensive
          income in accordance with paragraph 5.7.7. For a hedge of
          foreign currency risk, the foreign currency risk component of a
          non-derivative financial asset or a non-derivative financial
          liability may be designated as a hedging instrument provided that
          it is not an investment in an equity instrument for which an entity
          has elected to present changes in fair value in other
          comprehensive income in accordance with paragraph 5.7.5.
6.2.3     For hedge accounting purposes, only contracts with a party
          external to the reporting entity (ie external to the group or
          individual entity that is being reported on) can be designated as
          hedging instruments.

        Designation of hedging instruments

6.2.4     A qualifying instrument must be designated in its entirety as a hedging
          instrument. The only exceptions permitted are:

          (a)    separating the intrinsic value and time value of an option
                 contract and designating as the hedging instrument only the
                 change in intrinsic value of an option and not the change in its
                 time value (see paragraphs 6.5.15 and B6.5.29­B6.5.33);

          (b)    separating the forward element and the spot element of a
                 forward contract and designating as the hedging instrument
                 only the change in the value of the spot element of a forward
                 contract and not the forward element; similarly, the foreign
                 currency basis spread may be separated and excluded from the
                 designation of a financial instrument as the hedging instrument
                 (see paragraphs 6.5.16 and B6.5.34­B6.5.39); and

          (c)    a proportion of the entire hedging instrument, such as 50 per
                 cent of the nominal amount, may be designated as the hedging
                 instrument in a hedging relationship. However, a hedging
                 instrument may not be designated for a part of its change in
                 fair value that results from only a portion of the time period
                 during which the hedging instrument remains outstanding.

6.2.5     An entity may view in combination, and jointly designate as the
          hedging instrument, any combination of the following (including
          those circumstances in which the risk or risks arising from some
          hedging instruments offset those arising from others):

          (a)   derivatives or a proportion of them; and

          (b)   non-derivatives or a proportion of them.



6.2.6     However, a derivative instrument that combines a written option and a
          purchased option (for example, an interest rate collar) does not qualify
          as a hedging instrument if it is, in effect, a net written option at the
          date of designation (unless it qualifies in accordance with paragraph
          B6.2.4). Similarly, two or more instruments (or proportions of them)
          may be jointly designated as the hedging instrument only if, in
          combination, they are not, in effect, a net written option at the date of
          designation (unless it qualifies in accordance with paragraph B6.2.4).

6.3 Hedged items

        Qualifying items

6.3.1     A hedged item can be a recognised asset or liability, an
          unrecognised firm commitment, a forecast transaction or a net
          investment in a foreign operation. The hedged item can be:

          (a)   a single item; or

          (b)   a group of items (subject to paragraphs 6.6.1­6.6.6 and
                B6.6.1­B6.6.16).

          A hedged item can also be a component of such an item or group
          of items (see paragraphs 6.3.7 and B6.3.7­B6.3.25).

6.3.2     The hedged item must be reliably measurable.

6.3.3     If a hedged item is a forecast transaction (or a component
          thereof), that transaction must be highly probable.

6.3.4     An aggregated exposure that is a combination of an exposure that
          could qualify as a hedged item in accordance with paragraph 6.3.1
          and a derivative may be designated as a hedged item (see
          paragraphs B6.3.3­B6.3.4). This includes a forecast transaction of
          an aggregated exposure (ie uncommitted but anticipated future
          transactions that would give rise to an exposure and a derivative)
          if that aggregated exposure is highly probable and, once it has
          occurred and is therefore no longer forecast, is eligible as a
          hedged item.

6.3.5     For hedge accounting purposes, only assets, liabilities, firm
          commitments or highly probable forecast transactions with a
          party external to the reporting entity can be designated as hedged
          items. Hedge accounting can be applied to transactions between
          entities in the same group only in the individual or separate
          financial statements of those entities and not in the consolidated
          financial statements of the group, except for the consolidated
          financial statements of an investment entity, as defined in Ind AS
          110, where transactions between an investment entity and its
              subsidiaries measured at fair value through profit or loss will not
              be eliminated in the consolidated financial statements.

6.3.6         However, as an exception to paragraph 6.3.5, the foreign currency risk
              of an intragroup monetary item (for example, a payable/receivable
              between two subsidiaries) may qualify as a hedged item in the
              consolidated financial statements if it results in an exposure to foreign
              exchange rate gains or losses that are not fully eliminated on
              consolidation in accordance with Ind AS 21 The Effects of Changes in
              Foreign Exchange Rates. In accordance with Ind AS 21, foreign
              exchange rate gains and losses on intragroup monetary items are not
              fully eliminated on consolidation when the intragroup monetary item
              is transacted between two group entities that have different functional
              currencies. In addition, the foreign currency risk of a highly probable
              forecast intragroup transaction may qualify as a hedged item in
              consolidated financial statements provided that the transaction is
              denominated in a currency other than the functional currency of the
              entity entering into that transaction and the foreign currency risk will
              affect consolidated profit or loss.

        Designation of hedged items

6.3.7   An entity may designate an item in its entirety or a component of an item
        as the hedged item in a hedging relationship. An entire item comprises all
        changes in the cash flows or fair value of an item. A component
        comprises less than the entire fair value change or cash flow variability of
        an item. In that case, an entity may designate only the following types of
        components (including combinations) as hedged items:

        (a)      only changes in the cash flows or fair value of an item attributable
                 to a specific risk or risks (risk component), provided that, based on
                 an assessment within the context of the particular market structure,
                 the risk component is separately identifiable and reliably
                 measurable (see paragraphs B6.3.8­B6.3.15). Risk components
                 include a designation of only changes in the cash flows or the fair
                 value of a hedged item above or below a specified price or other
                 variable (a one-sided risk).

        (b)      one or more selected contractual cash flows.

        (c)      components of a nominal amount, ie a specified part of the amount
                 of an item (see paragraphs B6.3.16­B6.3.20).

6.4 Qualifying criteria for hedge accounting
6.4.1   A hedging relationship qualifies for hedge accounting only if all of
        the following criteria are met:

        (a)   the hedging relationship consists only of eligible hedging
              instruments and eligible hedged items.

        (b)   at the inception of the hedging relationship there is formal
              designation and documentation of the hedging relationship and
              the entity's risk management objective and strategy for
              undertaking the hedge. That documentation shall include
              identification of the hedging instrument, the hedged item, the
              nature of the risk being hedged and how the entity will assess
              whether the hedging relationship meets the hedge effectiveness
              requirements (including its analysis of the sources of hedge
              ineffectiveness and how it determines the hedge ratio).

        (c)   the hedging relationship meets all of the following hedge
              effectiveness requirements:

              (i)    there is an economic relationship between the hedged
                     item and the hedging instrument (see paragraphs B6.4.4­
                     B6.4.6);

              (ii)   the effect of credit risk does not dominate the value
                     changes that result from that economic relationship (see
                     paragraphs B6.4.7­B6.4.8); and

              (iii) the hedge ratio of the hedging relationship is the same as
                    that resulting from the quantity of the hedged item that
                    the entity actually hedges and the quantity of the hedging
                    instrument that the entity actually uses to hedge that
                    quantity of hedged item. However, that designation shall
                    not reflect an imbalance between the weightings of the
                    hedged item and the hedging instrument that would
                    create hedge ineffectiveness (irrespective of whether
                    recognised or not) that could result in an accounting
                    outcome that would be inconsistent with the purpose of
                    hedge accounting (see paragraphs B6.4.9­B6.4.11).

6.5 Accounting for qualifying hedging relationships

6.5.1   An entity applies hedge accounting to hedging relationships that
        meet the qualifying criteria in paragraph 6.4.1 (which include the
        entity's decision to designate the hedging relationship).
6.5.2   There are three types of hedging relationships:

        (a)   fair value hedge: a hedge of the exposure to changes in fair
              value of a recognised asset or liability or an unrecognised firm
              commitment, or a component of any such item, that is
              attributable to a particular risk and could affect profit or loss.

        (b)   cash flow hedge: a hedge of the exposure to variability in cash
              flows that is attributable to a particular risk associated with all,
              or a component of, a recognised asset or liability (such as all or
              some future interest payments on variable-rate debt) or a
              highly probable forecast transaction, and could affect profit or
              loss.

        (c)   hedge of a net investment in a foreign operation as defined in
              Ind AS 21.

6.5.3   If the hedged item is an equity instrument for which an entity has elected
        to present changes in fair value in other comprehensive income in
        accordance with paragraph 5.7.5, the hedged exposure referred to in
        paragraph 6.5.2(a) must be one that could affect other comprehensive
        income. In that case, and only in that case, the recognised hedge
        ineffectiveness is presented in other comprehensive income.

6.5.4   A hedge of the foreign currency risk of a firm commitment may be
        accounted for as a fair value hedge or a cash flow hedge.

6.5.5   If a hedging relationship ceases to meet the hedge effectiveness
        requirement relating to the hedge ratio (see paragraph 6.4.1(c)(iii))
        but the risk management objective for that designated hedging
        relationship remains the same, an entity shall adjust the hedge ratio
        of the hedging relationship so that it meets the qualifying criteria
        again (this is referred to in this Standard as `rebalancing'--see
        paragraphs B6.5.7­B6.5.21).

6.5.6   An entity shall discontinue hedge accounting prospectively only when
        the hedging relationship (or a part of a hedging relationship) ceases
        to meet the qualifying criteria (after taking into account any
        rebalancing of the hedging relationship, if applicable). This includes
        instances when the hedging instrument expires or is sold, terminated
        or exercised. For this purpose, the replacement or rollover of a
        hedging instrument into another hedging instrument is not an
        expiration or termination if such a replacement or rollover is part of,
        and consistent with, the entity's documented risk management
        objective. Additionally, for this purpose there is not an expiration or
        termination of the hedging instrument if:

        (a)   as a consequence of laws or regulations or the introduction of
              laws or regulations, the parties to the hedging instrument agree
              that one or more clearing counterparties replace their original
              counterparty to become the new counterparty to each of the
              parties. For this purpose, a clearing counterparty is a central
              counterparty (sometimes called a `clearing organisation' or
              `clearing agency') or an entity or entities, for example, a
              clearing member of a clearing organisation or a client of a
              clearing member of a clearing organisation, that are acting as a
              counterparty in order to effect clearing by a central
              counterparty. However, when the parties to the hedging
              instrument replace their original counterparties with different
              counterparties the requirement in this subparagraph is met
              only if each of those parties effects clearing with the same
              central counterparty.

        (b)   other changes, if any, to the hedging instrument are limited to
              those that are necessary to effect such a replacement of the
              counterparty. Such changes are limited to those that are
              consistent with the terms that would be expected if the hedging
              instrument were originally cleared with the clearing
              counterparty. These changes include changes in the collateral
              requirements, rights to offset receivables and payables
              balances, and charges levied.

        Discontinuing hedge accounting can either affect a hedging
        relationship in its entirety or only a part of it (in which case hedge
        accounting continues for the remainder of the hedging relationship).

6.5.7   An entity shall apply:
        (a) paragraph 6.5.10 when it discontinues hedge accounting for a fair
             value hedge for which the hedged item is (or is a component of) a
             financial instrument measured at amortised cost; and

        (b)   paragraph 6.5.12 when it discontinues hedge accounting for cash
              flow hedges.

        Fair value hedges

6.5.8   As long as a fair value hedge meets the qualifying criteria in
        paragraph 6.4.1, the hedging relationship shall be accounted for as
        follows:
         (a)   the gain or loss on the hedging instrument shall be recognised
               in profit or loss (or other comprehensive income, if the hedging
               instrument hedges an equity instrument for which an entity has
               elected to present changes in fair value in other comprehensive
               income in accordance with paragraph 5.7.5).

         (b)   the hedging gain or loss on the hedged item shall adjust the
               carrying amount of the hedged item (if applicable) and be
               recognised in profit or loss. If the hedged item is a financial
               asset (or a component thereof) that is measured at fair value
               through other comprehensive income in accordance with
               paragraph 4.1.2A, the hedging gain or loss on the hedged item
               shall be recognised in profit or loss. However, if the hedged
               item is an equity instrument for which an entity has elected to
               present changes in fair value in other comprehensive income in
               accordance with paragraph 5.7.5, those amounts shall remain
               in other comprehensive income. When a hedged item is an
               unrecognised firm commitment (or a component thereof), the
               cumulative change in the fair value of the hedged item
               subsequent to its designation is recognised as an asset or a
               liability with a corresponding gain or loss recognised in profit
               or loss.

6.5.9    When a hedged item in a fair value hedge is a firm commitment (or a
         component thereof) to acquire an asset or assume a liability, the initial
         carrying amount of the asset or the liability that results from the entity
         meeting the firm commitment is adjusted to include the cumulative
         change in the fair value of the hedged item that was recognised in the
         balance sheet.

6.5.10   Any adjustment arising from paragraph 6.5.8(b) shall be amortised to
         profit or loss if the hedged item is a financial instrument (or a component
         thereof) measured at amortised cost. Amortisation may begin as soon as
         an adjustment exists and shall begin no later than when the hedged item
         ceases to be adjusted for hedging gains and losses. The amortisation is
         based on a recalculated effective interest rate at the date that amortisation
         begins. In the case of a financial asset (or a component thereof) that is a
         hedged item and that is measured at fair value through other
         comprehensive income in accordance with paragraph 4.1.2A,
         amortisation applies in the same manner but to the amount that represents
         the cumulative gain or loss previously recognised in accordance with
         paragraph 6.5.8(b) instead of by adjusting the carrying amount.

         Cash flow hedges
6.5.11   As long as a cash flow hedge meets the qualifying criteria in
         paragraph 6.4.1, the hedging relationship shall be accounted for as
         follows:

         (a)   the separate component of equity associated with the hedged
               item (cash flow hedge reserve) is adjusted to the lower of the
               following (in absolute amounts):

               (i)    the cumulative gain or loss on the hedging instrument
                      from inception of the hedge; and

               (ii)   the cumulative change in fair value (present value) of the
                      hedged item (ie the present value of the cumulative
                      change in the hedged expected future cash flows) from
                      inception of the hedge.

         (b)   the portion of the gain or loss on the hedging instrument that is
               determined to be an effective hedge (ie the portion that is offset
               by the change in the cash flow hedge reserve calculated in
               accordance with (a)) shall be recognised in other
               comprehensive income.

         (c)   any remaining gain or loss on the hedging instrument (or any
               gain or loss required to balance the change in the cash flow
               hedge reserve calculated in accordance with (a)) is hedge
               ineffectiveness that shall be recognised in profit or loss.

         (d)   the amount that has been accumulated in the cash flow hedge
               reserve in accordance with (a) shall be accounted for as
               follows:

               (i)    if a hedged forecast transaction subsequently results in
                      the recognition of a non-financial asset or non-financial
                      liability, or a hedged forecast transaction for a non-
                      financial asset or a non-financial liability becomes a firm
                      commitment for which fair value hedge accounting is
                      applied, the entity shall remove that amount from the
                      cash flow hedge reserve and include it directly in the
                      initial cost or other carrying amount of the asset or the
                      liability. This is not a reclassification adjustment (see Ind
                      AS 1) and hence it does not affect other comprehensive
                      income.

               (ii)   for cash flow hedges other than those covered by (i), that
                      amount shall be reclassified from the cash flow hedge
                     reserve to profit or loss as a reclassification adjustment
                     (see Ind AS 1) in the same period or periods during which
                     the hedged expected future cash flows affect profit or loss
                     (for example, in the periods that interest income or
                     interest expense is recognised or when a forecast sale
                     occurs).

               (iii) however, if that amount is a loss and an entity expects
                     that all or a portion of that loss will not be recovered in
                     one or more future periods, it shall immediately reclassify
                     the amount that is not expected to be recovered into profit
                     or loss as a reclassification adjustment (see Ind AS 1).

6.5.12   When an entity discontinues hedge accounting for a cash flow hedge (see
         paragraphs 6.5.6 and 6.5.7(b)) it shall account for the amount that has
         been accumulated in the cash flow hedge reserve in accordance
         with paragraph 6.5.11(a) as follows:

         (a)   if the hedged future cash flows are still expected to occur, that
               amount shall remain in the cash flow hedge reserve until the future
               cash flows occur or until paragraph 6.5.11(d)(iii) applies. When the
               future cash flows occur, paragraph 6.5.11(d) applies.

         (b)   if the hedged future cash flows are no longer expected to occur, that
               amount shall be immediately reclassified from the cash flow hedge
               reserve to profit or loss as a reclassification adjustment (see Ind AS
               1). A hedged future cash flow that is no longer highly probable to
               occur may still be expected to occur.



         Hedges of a net investment in a foreign operation

6.5.13   Hedges of a net investment in a foreign operation, including a hedge
         of a monetary item that is accounted for as part of the net investment
         (see Ind AS 21), shall be accounted for similarly to cash flow hedges:

         (a)   the portion of the gain or loss on the hedging instrument that is
               determined to be an effective hedge shall be recognised in other
               comprehensive income (see paragraph 6.5.11); and

         (b)   the ineffective portion shall be recognised in profit or loss.

6.5.14   The cumulative gain or loss on the hedging instrument relating to the
         effective portion of the hedge that has been accumulated in the
         foreign currency translation reserve shall be reclassified from equity
         to profit or loss as a reclassification adjustment (see Ind AS 1) in
         accordance with paragraphs 48­49 of Ind AS 21 on the disposal or
         partial disposal of the foreign operation.

         Accounting for the time value of options

6.5.15   When an entity separates the intrinsic value and time value of an option
         contract and designates as the hedging instrument only the change in
         intrinsic value of the option (see paragraph 6.2.4(a)), it shall account for
         the time value of the option as follows (see paragraphs B6.5.29­
         B6.5.33):

         (a)   an entity shall distinguish the time value of options by the type of
               hedged item that the option hedges (see paragraph B6.5.29):

               (i)    a transaction related hedged item; or

               (ii)   a time-period related hedged item.

         (b)   the change in fair value of the time value of an option that hedges a
               transaction related hedged item shall be recognised in other
               comprehensive income to the extent that it relates to the hedged
               item and shall be accumulated in a separate component of equity.
               The cumulative change in fair value arising from the time value of
               the option that has been accumulated in a separate component of
               equity (the `amount') shall be accounted for as follows:

               (i)    if the hedged item subsequently results in the recognition of a
                      non-financial asset or a non-financial liability, or a firm
                      commitment for a non-financial asset or a non-financial
                      liability for which fair value hedge accounting is applied, the
                      entity shall remove the amount from the separate component
                      of equity and include it directly in the initial cost or other
                      carrying amount of the asset or the liability. This is not a
                      reclassification adjustment (see Ind AS 1) and hence does
                      not affect other comprehensive income.

               (ii)   for hedging relationships other than those covered by (i), the
                      amount shall be reclassified from the separate component of
                      equity to profit or loss as a reclassification adjustment (see
                      Ind AS 1) in the same period or periods during which the
                      hedged expected future cash flows affect profit or loss (for
                      example, when a forecast sale occurs).

               (iii) however, if all or a portion of that amount is not expected to
                    be recovered in one or more future periods, the amount that is
                    not expected to be recovered shall be immediately
                    reclassified into profit or loss as a reclassification adjustment
                    (see Ind AS 1).

        (c)   the change in fair value of the time value of an option that hedges a
              time-period related hedged item shall be recognised in other
              comprehensive income to the extent that it relates to the hedged
              item and shall be accumulated in a separate component of equity.
              The time value at the date of designation of the option as a hedging
              instrument, to the extent that it relates to the hedged item, shall be
              amortised on a systematic and rational basis over the period during
              which the hedge adjustment for the option's intrinsic value could
              affect profit or loss (or other comprehensive income, if the hedged
              item is an equity instrument for which an entity has elected to
              present changes in fair value in other comprehensive income in
              accordance with paragraph 5.7.5). Hence, in each reporting period,
              the amortisation amount shall be reclassified from the separate
              component of equity to profit or loss as a reclassification
              adjustment (see Ind AS 1). However, if hedge accounting is
              discontinued for the hedging relationship that includes the change
              in intrinsic value of the option as the hedging instrument, the net
              amount (ie including cumulative amortisation) that has been
              accumulated in the separate component of equity shall be
              immediately reclassified into profit or loss as a reclassification
              adjustment (see Ind AS 1).
        Accounting for the forward element of forward contracts and
        foreign currency basis spreads of financial instruments

6.5.16 When an entity separates the forward element and the spot element of a
       forward contract and designates as the hedging instrument only the
       change in the value of the spot element of the forward contract, or when
       an entity separates the foreign currency basis spread from a financial
       instrument and excludes it from the designation of that financial
       instrument as the hedging instrument (see paragraph 6.2.4(b)), the entity
       may apply paragraph 6.5.15 to the forward element of the forward
       contract or to the foreign currency basis spread in the same manner as it
       is applied to the time value of an option. In that case, the entity shall
       apply the application guidance in paragraphs B6.5.34­B6.5.39.

6.6 Hedges of a group of items

        Eligibility of a group of items as the hedged item

6.6.1   A group of items (including a group of items that constitute a net
        position; see paragraphs B6.6.1­B6.6.8) is an eligible hedged item
        only if:

        (a)   it consists of items (including components of items) that are,
              individually, eligible hedged items;

        (b)   the items in the group are managed together on a group basis
              for risk management purposes; and

        (c)   in the case of a cash flow hedge of a group of items whose
              variabilities in cash flows are not expected to be approximately
              proportional to the overall variability in cash flows of the
              group so that offsetting risk positions arise:

              (i)    it is a hedge of foreign currency risk; and

              (ii)   the designation of that net position specifies the reporting
                     period in which the forecast transactions are expected to
                     affect profit or loss, as well as their nature and volume
                     (see paragraphs B6.6.7­B6.6.8).

        Designation of a component of a nominal amount

6.6.2   A component that is a proportion of an eligible group of items is an
        eligible hedged item provided that designation is consistent with the
        entity's risk management objective.

6.6.3   A layer component of an overall group of items (for example, a bottom
        layer) is eligible for hedge accounting only if:

        (a)   it is separately identifiable and reliably measurable;

        (b)   the risk management objective is to hedge a layer component;

        (c)   the items in the overall group from which the layer is identified are
              exposed to the same hedged risk (so that the measurement of the
              hedged layer is not significantly affected by which particular items
              from the overall group form part of the hedged layer);

        (d)   for a hedge of existing items (for example, an unrecognised firm
              commitment or a recognised asset) an entity can identify and track
              the overall group of items from which the hedged layer is defined
              (so that the entity is able to comply with the requirements for the
              accounting for qualifying hedging relationships); and
        (e)   any items in the group that contain prepayment options meet the
              requirements for components of a nominal amount (see
              paragraph B6.3.20).

        Presentation

6.6.4   For a hedge of a group of items with offsetting risk positions (ie in a
        hedge of a net position) whose hedged risk affects different line items in
        the statement of profit and loss, any hedging gains or losses in that
        statement shall be presented in a separate line from those affected by the
        hedged items. Hence, in that statement the amount in the line item that
        relates to the hedged item itself (for example, revenue or cost of sales)
        remains unaffected.

6.6.5   For assets and liabilities that are hedged together as a group in a fair
        value hedge, the gain or loss in the balance sheet on the individual assets
        and liabilities shall be recognised as an adjustment of the carrying
        amount of the respective individual items comprising the group in
        accordance with paragraph 6.5.8(b).

        Nil net positions

6.6.6   When the hedged item is a group that is a nil net position (ie the hedged
        items among themselves fully offset the risk that is managed on a group
        basis), an entity is permitted to designate it in a hedging relationship that
        does not include a hedging instrument, provided that:

        (a)   the hedge is part of a rolling net risk hedging strategy, whereby the
              entity routinely hedges new positions of the same type as time
              moves on (for example, when transactions move into the time
              horizon for which the entity hedges);

        (b)   the hedged net position changes in size over the life of the rolling
              net risk hedging strategy and the entity uses eligible hedging
              instruments to hedge the net risk (ie when the net position is not
              nil);

        (c)   hedge accounting is normally applied to such net positions when
              the net position is not nil and it is hedged with eligible hedging
              instruments; and

        (d)   not applying hedge accounting to the nil net position would give
              rise to inconsistent accounting outcomes, because the accounting
              would not recognise the offsetting risk positions that would
              otherwise be recognised in a hedge of a net position.
6.7 Option to designate a credit exposure as measured at fair value
through profit or loss

        Eligibility of credit exposures for designation at fair value
        through profit or loss

6.7.1   If an entity uses a credit derivative that is measured at fair value
        through profit or loss to manage the credit risk of all, or a part of, a
        financial instrument (credit exposure) it may designate that financial
        instrument to the extent that it is so managed (ie all or a proportion
        of it) as measured at fair value through profit or loss if:

        (a)   the name of the credit exposure (for example, the borrower, or
              the holder of a loan commitment) matches the reference entity
              of the credit derivative (`name matching'); and

        (b)   the seniority of the financial instrument matches that of the
              instruments that can be delivered in accordance with the credit
              derivative.

        An entity may make this designation irrespective of whether the
        financial instrument that is managed for credit risk is within the
        scope of this Standard (for example, an entity may designate loan
        commitments that are outside the scope of this Standard). The entity
        may designate that financial instrument at, or subsequent to, initial
        recognition, or while it is unrecognised. The entity shall document
        the designation concurrently.

        Accounting for credit exposures designated at fair value
        through profit or loss

6.7.2   If a financial instrument is designated in accordance with paragraph 6.7.1
        as measured at fair value through profit or loss after its initial
        recognition, or was previously not recognised, the difference at the time
        of designation between the carrying amount, if any, and the fair value
        shall immediately be recognised in profit or loss. For financial assets
        measured at fair value through other comprehensive income in
        accordance with paragraph 4.1.2A, the cumulative gain or loss previously
        recognised in other comprehensive income shall immediately be
        reclassified from equity to profit or loss as a reclassification adjustment
        (see Ind AS 1).

6.7.3   An entity shall discontinue measuring the financial instrument that gave
        rise to the credit risk, or a proportion of that financial instrument, at fair
        value through profit or loss if:

        (a)   the qualifying criteria in paragraph 6.7.1 are no longer met, for
              example:

              (i)    the credit derivative or the related financial instrument that
                     gives rise to the credit risk expires or is sold, terminated or
                     settled; or

              (ii)   the credit risk of the financial instrument is no longer
                     managed using credit derivatives. For example, this could
                     occur because of improvements in the credit quality of the
                     borrower or the loan commitment holder or changes to
                     capital requirements imposed on an entity; and

        (b)   the financial instrument that gives rise to the credit risk is not
              otherwise required to be measured at fair value through profit or
              loss (ie the entity's business model has not changed in the
              meantime so that a reclassification in accordance with paragraph
              4.4.1 was required).

6.7.4   When an entity discontinues measuring the financial instrument that
        gives rise to the credit risk, or a proportion of that financial instrument, at
        fair value through profit or loss, that financial instrument's fair value at
        the date of discontinuation becomes its new carrying amount.
        Subsequently, the same measurement that was used before designating
        the financial instrument at fair value through profit or loss shall be
        applied (including amortisation that results from the new carrying
        amount). For example, a financial asset that had originally been classified
        as measured at amortised cost would revert to that measurement and its
        effective interest rate would be recalculated based on its new gross
        carrying amount on the date of discontinuing measurement at fair value
        through profit or loss.

Chapter 7 Effective date and transition
Appendix A
Defined terms

This appendix is an integral part of the Standard.

12-month expected The portion of lifetime expected credit losses that
credit losses       represent the expected credit losses that result from
                    default events on a financial instrument that are possible
                    within the 12 months after the reporting date.
amortised cost of a The amount at which the financial asset or financial
financial asset or liability is measured at initial recognition minus the
financial liability principal repayments, plus or minus the cumulative
                    amortisation using the effective interest method of any
                    difference between that initial amount and the maturity
                    amount and, for financial assets, adjusted for any loss
                    allowance.
contract assets     Those rights that Ind AS 115 Revenue from Contracts
                    with Customers specifies are accounted for in accordance
                    with this Standard for the purposes of recognising and
                    measuring impairment gains or losses.
credit-impaired     A financial asset is credit-impaired when one or more
financial asset     events that have a detrimental impact on the estimated
                    future cash flows of that financial asset have occurred.
                    Evidence that a financial asset is credit-impaired include
                    observable data about the following events:

                       (a) significant financial difficulty of the issuer or the
                           borrower;
                       (b) a breach of contract, such as a default or past due
                           event;
                       (c)    the lender(s) of the borrower, for economic or
                           contractual reasons relating to the borrower's
                           financial difficulty, having granted to the borrower a
                           concession(s) that the lender(s) would not otherwise
                           consider;
                       (d) it is becoming probable that the borrower will enter
                           bankruptcy or other financial reorganisation;
                       (e)    the disappearance of an active market for that
                           financial asset because of financial difficulties; or
                       (f) the purchase or origination of a financial asset at a
                           deep discount that reflects the incurred credit losses.

                       It may not be possible to identify a single discrete event--
                       instead, the combined effect of several events may have
                       caused financial assets to become credit-impaired.
credit loss            The difference between all contractual cash flows that are
                       due to an entity in accordance with the contract and all the
                       cash flows that the entity expects to receive (ie all cash
                       shortfalls), discounted at the original effective interest
                       rate (or credit-adjusted effective interest rate for
                       purchased or originated credit-impaired financial
                       assets). An entity shall estimate cash flows by considering
                       all contractual terms of the financial instrument (for
                       example, prepayment, extension, call and similar options)
                       through the expected life of that financial instrument. The
                       cash flows that are considered shall include cash flows
                       from the sale of collateral held or other credit
                       enhancements that are integral to the contractual terms.
                       There is a presumption that the expected life of a financial
                       instrument can be estimated reliably. However, in those
                       rare cases when it is not possible to reliably estimate the
                       expected life of a financial instrument, the entity shall use
                       the remaining contractual term of the financial instrument.

credit-adjusted      The rate that exactly discounts the estimated future cash
effective   interest payments or receipts through the expected life of the
rate                 financial asset to the amortised cost of a financial asset
                     that is a purchased or originated credit-impaired
                     financial asset. When calculating the credit-adjusted
                     effective interest rate, an entity shall estimate the expected
                     cash flows by considering all contractual terms of the
                     financial asset (for example, prepayment, extension, call
                     and similar options) and expected credit losses. The
                     calculation includes all fees and points paid or received
                     between parties to the contract that are an integral part of
                     the effective interest rate (see paragraphs B5.4.1 B5.4.3),
                     transaction costs, and all other premiums or discounts.
                     There is a presumption that the cash flows and the
                     expected life of a group of similar financial instruments
                     can be estimated reliably. However, in those rare cases
                     when it is not possible to reliably estimate the cash flows
                     or the remaining life of a financial instrument (or group of
                     financial instruments), the entity shall use the contractual
                     cash flows over the full contractual term of the financial
                     instrument (or group of financial instruments).
Derecognition        The removal of a previously recognised financial asset or
                     financial liability from an entity's balance sheet.

                       A financial instrument or other contract within the scope
                       of this Standard with all three of the following
                       characteristics.
                       (a) its value changes in response to the change in a
Derivative                 specified interest rate, financial instrument price,
                           commodity price, foreign exchange rate, index of
                           prices or rates, credit rating or credit index, or other
                           variable, provided in the case of a non-financial
                           variable that the variable is not specific to a party to
                           the contract (sometimes called the `underlying').
                        (b) it requires no initial net investment or an initial net
                            investment that is smaller than would be required for
                           other types of contracts that would be expected to
                           have a similar response to changes in market factors.
                        (c) it is settled at a future date.
Dividends              Distributions of profits to holders of equity instruments in
                       proportion to their holdings of a particular class of capital.
effective interest     The rate that exactly discounts estimated future cash
method                 payments or receipts through the expected life of the
                       financial asset or financial liability to the gross carrying
                       amount of a financial asset or to the amortised cost of a
                       financial liability. When calculating the effective interest
                       rate, an entity shall estimate the expected cash flows by
                       considering all the contractual terms of the financial
                       instrument (for example, prepayment, extension, call and
                       similar options) but shall not consider the expected credit
                       losses. The calculation includes all fees and points paid or
                       received between parties to the contract that are an integral
                       part of the effective interest rate (see paragraphs B5.4.1­
                       B5.4.3), transaction costs, and all other premiums or
                       discounts. There is a presumption that the cash flows and
                       the expected life of a group of similar financial
                       instruments can be estimated reliably. However, in those
                       rare cases when it is not possible to reliably estimate the
                       cash flows or the expected life of a financial instrument
                       (or group of financial instruments), the entity shall use the
                       contractual cash flows over the full contractual term of the
                       financial instrument (or group of financial instruments).
expected       credit The weighted average of credit losses with the respective
losses                 risks of a default occurring as the weights.
financial guarantee A contract that requires the issuer to make specified
contract               payments to reimburse the holder for a loss it incurs
                       because a specified debtor fails to make payment when
                       due in accordance with the original or modified terms of a
                       debt instrument.
financial liability at A financial liability that meets one of the following
fair value through conditions:
profit or loss         (a) it meets the definition of held for trading.
                       (b) upon initial recognition it is designated by the entity
                              as at fair value through profit or loss in accordance
                              with paragraph 4.2.2 or 4.3.5.
                       (c) it is designated either upon initial recognition or
                              subsequently as at fair value through profit or loss in
                              accordance with paragraph 6.7.1.
firm commitment        A binding agreement for the exchange of a specified
                       quantity of resources at a specified price on a specified
                       future date or dates.
forecast
transaction            An uncommitted but anticipated future transaction.
gross       carrying
amount       of      a The amortised cost of a financial asset, before adjusting
financial asset        for any loss allowance.
                       a designated derivative or (for a hedge of the risk of
                       changes in foreign currency exchange rates only) a
hedging instrument designated non-derivative financial asset or non-derivative
                      financial liability whose fair value or cash flows are
                      expected to offset changes in the fair value or cash flows
                      of a designated hedged item

hedge ratio        The relationship between the quantity of the hedging
                   instrument and the quantity of the hedged item in terms of
                   their relative weighting.
held for trading   A financial asset or financial liability that:
                   (a) is acquired or incurred principally for the purpose
                          of selling or repurchasing it in the near term;
                   (b)       on initial recognition is part of a portfolio of
                          identified financial instruments that are managed
                          together and for which there is evidence of a recent
                          actual pattern of short-term profit-taking; or
                   (c)      is a derivative (except for a derivative that is a
                          financial guarantee contract or a designated and
                          effective hedging instrument).
impairment gain or Gains or losses that are recognised in profit or loss in
loss                accordance with paragraph 5.5.8 and that arise from
                    applying the impairment requirements in Section 5.5.
lifetime expected   The expected credit losses that result from all possible
credit losses       default events over the expected life of a financial
                    instrument.
loss allowance     The allowance for expected credit losses on financial
                   assets measured in accordance with paragraph 4.1.2, lease
                   receivables and contract assets, the accumulated
                   impairment amount for financial assets measured in
                   accordance with paragraph 4.1.2A and the provision for
                   expected credit losses on loan commitments and financial
                   guarantee contracts.
modification gain The amount arising from adjusting the gross carrying
or loss            amount of a financial asset to reflect the renegotiated or
                   modified contractual cash flows. The entity recalculates
                   the gross carrying amount of a financial asset as the
                   present value of the estimated future cash payments or
                   receipts through the expected life of the renegotiated or
                   modified financial asset that are discounted at the financial
                   asset's original effective interest rate (or the
                   original credit-adjusted effective interest rate for
                   purchased or originated credit-impaired financial
                   assets) or, when applicable, the revised effective interest
                   rate calculated in accordance with paragraph 6.5.10.
                   When estimating the expected cash flows of a financial
                   asset, an entity shall consider all contractual terms of the
                   financial asset (for example, prepayment, call and similar
                   options) but shall not consider the expected credit losses,
                   unless the financial asset is a purchased or originated
                   credit-impaired financial asset, in which case an entity
                   shall also consider the initial expected credit losses that
                   were considered when calculating the original credit-
                   adjusted effective interest rate.
past due                  A financial asset is past due when a counterparty has
                          failed to make a payment when that payment was
                          contractually due.
purchased or              Purchased or originated financial asset(s) that are credit-
originated                 impaired on initial recognition.
credit-impaired
financial asset
reclassification          The first day of the first reporting period following the
date                      change in business model that results in an entity
                          reclassifying financial assets.
regular        way        A purchase or sale of a financial asset under a contract
purchase or sale          whose terms require delivery of the asset within the time
                          frame established generally by regulation or convention in
                          the marketplace concerned.
transaction costs         Incremental costs that are directly attributable to the
                          acquisition, issue or disposal of a financial asset or
                          financial liability (see paragraph B5.4.8). An incremental
                          cost is one that would not have been incurred if the entity
                          had not acquired, issued or disposed of the financial
                          instrument.

The following terms are defined in paragraph 11 of Ind AS 32, Appendix A of Ind
AS 107, Appendix A of Ind AS 113 or Appendix A of Ind AS 115 and are used in
this Standard with the meanings specified in Ind AS 32, Ind AS 107, Ind AS 113
or Ind AS 115:

(a)     credit risk;2
(b)     equity instrument;
(c)     fair value;
(d)     financial asset;
(e)     financial instrument;
(f)     financial liability;
(g)     transaction price.




                                                            
      2
         This term (as defined in Ind AS 107) is used in the requirements for
      presenting the effects of changes in credit risk on liabilities designated as at
      fair value through profit or loss (see paragraph 5.7.7).
 
Appendix B
Application guidance

This appendix is an integral part of the Standard.

Scope (Chapter 2)

B2.1    Some contracts require a payment based on climatic, geological or other
        physical variables. (Those based on climatic variables are sometimes
        referred to as `weather derivatives'.) If those contracts are not within the
        scope of Ind AS 104, they are within the scope of this Standard.

B2.2    This Standard does not change the requirements relating to royalty
        agreements based on the volume of sales or service revenues that are
        accounted for under Ind AS 115 Revenue from Contracts with
        Customers.

B2.3    Sometimes, an entity makes what it views as a `strategic investment' in
        equity instruments issued by another entity, with the intention of
        establishing or maintaining a long-term operating relationship with the
        entity in which the investment is made. The investor or joint venturer
        entity uses Ind AS 28 to determine whether the equity method of
        accounting shall be applied to such an investment.

B2.4    This Standard applies to the financial assets and financial liabilities of
        insurers, other than rights and obligations that paragraph 2.1(e) excludes
        because they arise under contracts within the scope of Ind AS 104
        Insurance Contracts.

B2.5    Financial guarantee contracts may have various legal forms, such as a
        guarantee, some types of letter of credit, a credit default contract or an
        insurance contract. Their accounting treatment does not depend on their
        legal form. The following are examples of the appropriate treatment (see
        paragraph 2.1(e)):

         (a)   Although a financial guarantee contract meets the definition of an
               insurance contract in Ind AS 104 if the risk transferred is
               significant, the issuer applies this Standard. Nevertheless, if the
               issuer has previously asserted explicitly that it regards such
               contracts as insurance contracts and has used accounting that is
               applicable to insurance contracts, the issuer may elect to apply
               either this Standard or Ind AS 104 to such financial guarantee
               contracts. If this Standard applies, paragraph 5.1.1 requires the
             issuer to recognise a financial guarantee contract initially at fair
             value. If the financial guarantee contract was issued to an unrelated
             party in a stand-alone arm's length transaction, its fair value at
             inception is likely to equal the premium received, unless there is
             evidence to the contrary. Subsequently, unless the financial
             guarantee contract was designated at inception as at fair value
             through profit or loss or unless paragraphs 3.2.15­3.2.23 and
             B3.2.12­B3.2.17 apply (when a transfer of a financial asset does
             not qualify for derecognition or the continuing involvement
             approach applies), the issuer measures it at the higher of:

             (i)    the amount determined in accordance with Section 5.5; and

             (ii)   the amount initially recognised less, when appropriate, the
                    cumulative amount of income recognised in accordance with
                    the principles of Ind AS 115 (see paragraph 4.2.1(c)).

       (b)   Some credit-related guarantees do not, as a precondition for
             payment, require that the holder is exposed to, and has incurred a
             loss on, the failure of the debtor to make payments on the
             guaranteed asset when due. An example of such a guarantee is one
             that requires payments in response to changes in a specified credit
             rating or credit index. Such guarantees are not financial guarantee
             contracts as defined in this Standard, and are not insurance
             contracts as defined in Ind AS 104. Such guarantees are derivatives
             and the issuer applies this Standard to them.

       (c)   If a financial guarantee contract was issued in connection with the
             sale of goods, the issuer applies Ind AS 115 in determining when it
             recognises the revenue from the guarantee and from the sale of
             goods.

B2.6   Assertions that an issuer regards contracts as insurance contracts are
       typically found throughout the issuer's communications with customers
       and regulators, contracts, business documentation and financial
       statements. Furthermore, insurance contracts are often subject to
       accounting requirements that are distinct from the requirements for other
       types of transaction, such as contracts issued by banks or commercial
       companies. In such cases, an issuer's financial statements typically
       include a statement that the issuer has used those accounting
       requirements.


Recognition and derecognition (Chapter 3)
        Initial recognition (Section 3.1)

B3.1.1 As a consequence of the principle in paragraph 3.1.1, an entity recognises
       all of its contractual rights and obligations under derivatives in its
       balance sheet as assets and liabilities, respectively, except for derivatives
       that prevent a transfer of financial assets from being accounted for as a
       sale (see paragraph B3.2.14). If a transfer of a financial asset does not
       qualify for derecognition, the transferee does not recognise the
       transferred asset as its asset (see paragraph B3.2.15).

B3.1.2 The following are examples of applying the principle in paragraph 3.1.1:

        (a)    Unconditional receivables and payables are recognised as assets or
               liabilities when the entity becomes a party to the contract and, as a
               consequence, has a legal right to receive or a legal obligation to pay
               cash.

        (b)    Assets to be acquired and liabilities to be incurred as a result of a
               firm commitment to purchase or sell goods or services are
               generally not recognised until at least one of the parties has
               performed under the agreement. For example, an entity that
               receives a firm order does not generally recognise an asset (and the
               entity that places the order does not recognise a liability) at the time
               of the commitment but, instead, delays recognition until the
               ordered goods or services have been shipped, delivered or
               rendered. If a firm commitment to buy or sell non-financial items is
               within the scope of this Standard in accordance with paragraphs
               2.4­2.7, its net fair value is recognised as an asset or a liability on
               the commitment date (see paragraph B4.1.30(c)). In addition, if a
               previously unrecognised firm commitment is designated as a
               hedged item in a fair value hedge, any change in the net fair value
               attributable to the hedged risk is recognised as an asset or a liability
               after the inception of the hedge (see paragraphs 6.5.8(b) and 6.5.9).

        (c)    A forward contract that is within the scope of this Standard (see
               paragraph 2.1) is recognised as an asset or a liability on the
               commitment date, instead of on the date on which settlement takes
               place. When an entity becomes a party to a forward contract, the
               fair values of the right and obligation are often equal, so that the net
               fair value of the forward is zero. If the net fair value of the right
               and obligation is not zero, the contract is recognised as an asset or
               liability.
        (d)    Option contracts that are within the scope of this Standard (see
               paragraph 2.1) are recognised as assets or liabilities when the
               holder or writer becomes a party to the contract.

         (e)   Planned future transactions, no matter how likely, are not assets
               and liabilities because the entity has not become a party to a
               contract.

Regular way purchase or sale of financial assets

B3.1.3 A regular way purchase or sale of financial assets is recognised using
       either trade date accounting or settlement date accounting as described in
       paragraphs B3.1.5 and B3.1.6. An entity shall apply the same method
       consistently for all purchases and sales of financial assets that are
       classified in the same way in accordance with this Standard. For this
       purpose assets that are mandatorily measured at fair value through profit
       or loss form a separate classification from assets designated as measured
       at fair value through profit or loss. In addition, investments in equity
       instruments accounted for using the option provided in paragraph 5.7.5
       form a separate classification.

B3.1.4 A contract that requires or permits net settlement of the change in the
       value of the contract is not a regular way contract. Instead, such a
       contract is accounted for as a derivative in the period between the trade
       date and the settlement date.

B3.1.5 The trade date is the date that an entity commits itself to purchase or sell
       an asset. Trade date accounting refers to (a) the recognition of an asset to
       be received and the liability to pay for it on the trade date, and (b)
       derecognition of an asset that is sold, recognition of any gain or loss on
       disposal and the recognition of a receivable from the buyer for payment
       on the trade date. Generally, interest does not start to accrue on the asset
       and corresponding liability until the settlement date when title passes.

B3.1.6 The settlement date is the date that an asset is delivered to or by an entity.
       Settlement date accounting refers to (a) the recognition of an asset on the
       day it is received by the entity, and (b) the derecognition of an asset and
       recognition of any gain or loss on disposal on the day that it is delivered
       by the entity. When settlement date accounting is applied an entity
       accounts for any change in the fair value of the asset to be received
       during the period between the trade date and the settlement date in the
       same way as it accounts for the acquired asset. In other words, the change
       in value is not recognised for assets measured at amortised cost; it is
       recognised in profit or loss for assets classified as financial assets
       measured at fair value through profit or loss; and it is recognised in other
        comprehensive income for financial assets measured at fair value through
        other comprehensive income in accordance with paragraph 4.1.2A and
        for investments in equity instruments accounted for in accordance with
        paragraph 5.7.5.

Derecognition of financial assets (Section 3.2)
B3.2.1 The following flow chart illustrates the evaluation of whether and to what
       extent a financial asset is derecognised.
   Consolidate all subsidiaries [Paragraph 3.2.1] 




  Determine whether the derecognition principle below are applied to 
  a part or all of an asset (or group of similar assets) [Paragraph 3.2.2] 




            Have the right to the cash from the asset 
            expired? [[Paragraph 3.2.3(a)]                                    Yes         Derecognise the asset 


                                           No

            Has the entity transferred its right to receive the 
            cash flows from the asset? [Paragraph 3.2.4(a)] 


                                          No


              Has the entity assumed an obligation to pay the 
                 cash flows from the asset that meets the                           No      Continue to recognise 
             conditions in paragraph 3.2.5? [Paragraph 3.2.4(b)]                            the asset the asset 


                                         Yes

            Has  the  entity  transferred  substantially  all  risks 
            and rewards? [Paragraph 3.2.6(a)]                                   Yes         Derecognise the asset 


                                         No


          Has  the  entity  retained  substantially  all  risks  and 
                                                                                            Continue to recognise 
          rewards? [Paragraph 3.2.6(b)]                                         Yes
                                                                                            the asset the asset 

                                          No


           Has  the  entity  retained  control  of  the  asset?                             Derecognise the asset
           [Paragraph 3.2.6(c)]                                                 No


                                           Yes

 Continue to recognise the asset to the extent of the entity's 
 continuing involvement 


Arrangements under which an entity retains the contractual rights to receive the
cash flows of a financial asset, but assumes a contractual obligation to pay the
cash flows to one or more recipients (paragraph 3.2.4(b))
B3.2.2   The situation described in paragraph 3.2.4(b) (when an entity retains the
         contractual rights to receive the cash flows of the financial asset, but assumes a
         contractual obligation to pay the cash flows to one or more recipients) occurs, for
         example, if the entity is a trust, and issues to investors beneficial interests in the
         underlying financial assets that it owns and provides servicing of those financial
         assets. In that case, the financial assets qualify for derecognition if the conditions
         in paragraphs 3.2.5 and 3.2.6 are met.

B3.2.3 In applying paragraph 3.2.5, the entity could be, for example, the originator of the
       financial asset, or it could be a group that includes a subsidiary that has acquired
       the financial asset and passes on cash flows to unrelated third party investors.

         Evaluation of the transfer of risks and rewards of ownership (paragraph 3.2.6)

B3.2.4 Examples of when an entity has transferred substantially all the risks and rewards
       of ownership are:

         (a)   an unconditional sale of a financial asset;

         (b)   a sale of a financial asset together with an option to repurchase the financial
               asset at its fair value at the time of repurchase; and

         (c)   a sale of a financial asset together with a put or call option that is deeply out
               of the money (ie an option that is so far out of the money it is highly
               unlikely to go into the money before expiry).

B3.2.5 Examples of when an entity has retained substantially all the risks and rewards of
       ownership are:

         (a)   a sale and repurchase transaction where the repurchase price is a fixed price
               or the sale price plus a lender's return;
         (b)   a securities lending agreement;
         (c)   a sale of a financial asset together with a total return swap that transfers the
               market risk exposure back to the entity;
         (d)   a sale of a financial asset together with a deep in-the-money put or call
               option (ie an option that is so far in the money that it is highly unlikely to go
               out of the money before expiry); and
         (e)   a sale of short-term receivables in which the entity guarantees to
               compensate the transferee for credit losses that are likely to occur.

B3.2.6    If an entity determines that as a result of the transfer, it has transferred
         substantially all the risks and rewards of ownership of the transferred asset, it does
         not recognise the transferred asset again in a future period, unless it reacquires the
         transferred asset in a new transaction.
         Evaluation of the transfer of control

B3.2.7    An entity has not retained control of a transferred asset if the transferee has the
         practical ability to sell the transferred asset. An entity has retained control of a
         transferred asset if the transferee does not have the practical ability to sell the
         transferred asset. A transferee has the practical ability to sell the transferred asset
         if it is traded in an active market because the transferee could repurchase the
         transferred asset in the market if it needs to return the asset to the entity. For
         example, a transferee may have the practical ability to sell a transferred asset if the
         transferred asset is subject to an option that allows the entity to repurchase it, but
         the transferee can readily obtain the transferred asset in the market if the option is
         exercised. A transferee does not have the practical ability to sell the transferred
         asset if the entity retains such an option and the transferee cannot readily obtain
         the transferred asset in the market if the entity exercises its option.

B3.2.8    The transferee has the practical ability to sell the transferred asset only if the
         transferee can sell the transferred asset in its entirety to an unrelated third party
         and is able to exercise that ability unilaterally and without imposing additional
         restrictions on the transfer. The critical question is what the transferee is able to do
         in practice, not what contractual rights the transferee has concerning what it can
         do with the transferred asset or what contractual prohibitions exist. In particular:

         (a)   a contractual right to dispose of the transferred asset has little practical
               effect if there is no market for the transferred asset, and
         (b)   an ability to dispose of the transferred asset has little practical effect if it
               cannot be exercised freely. For that reason:

               (i)    the transferee's ability to dispose of the transferred asset must be
                      independent of the actions of others (ie it must be a unilateral ability),
                      and
               (ii)   the transferee must be able to dispose of the transferred asset without
                      needing to attach restrictive conditions or `strings' to the transfer (eg
                      conditions about how a loan asset is serviced or an option giving the
                      transferee the right to repurchase the asset).

B3.2.9    That the transferee is unlikely to sell the transferred asset does not, of itself, mean
         that the transferor has retained control of the transferred asset. However, if a put
         option or guarantee constrains the transferee from selling the transferred asset,
         then the transferor has retained control of the transferred asset. For example, if a
         put option or guarantee is sufficiently valuable it constrains the transferee from
         selling the transferred asset because the transferee would, in practice, not sell the
         transferred asset to a third party without attaching a similar option or other
         restrictive conditions. Instead, the transferee would hold the transferred asset so as
         to obtain payments under the guarantee or put option. Under these circumstances
         the transferor has retained control of the transferred asset.

         Transfers that qualify for derecognition

B3.2.10 An entity may retain the right to a part of the interest payments on transferred
        assets as compensation for servicing those assets. The part of the interest
        payments that the entity would give up upon termination or transfer of the
        servicing contract is allocated to the servicing asset or servicing liability. The part
        of the interest payments that the entity would not give up is an interest-only strip
        receivable. For example, if the entity would not give up any interest upon
        termination or transfer of the servicing contract, the entire interest spread is an
        interest-only strip receivable. For the purposes of applying paragraph 3.2.13, the
        fair values of the servicing asset and interest-only strip receivable are used to
        allocate the carrying amount of the receivable between the part of the asset that is
        derecognised and the part that continues to be recognised. If there is no servicing
        fee specified or the fee to be received is not expected to compensate the entity
        adequately for performing the servicing, a liability for the servicing obligation is
        recognised at fair value.

B3.2.11 When measuring the fair values of the part that continues to be recognised and
        the part that is derecognised for the purposes of applying paragraph 3.2.13, an
        entity applies the fair value measurement requirements in Ind AS 113 in addition
        to paragraph 3.2.14.

         Transfers that do not qualify for derecognition

B3.2.12 The following is an application of the principle outlined in paragraph 3.2.15. If a
        guarantee provided by the entity for default losses on the transferred asset
        prevents a transferred asset from being derecognised because the entity has
        retained substantially all the risks and rewards of ownership of the transferred
        asset, the transferred asset continues to be recognised in its entirety and the
        consideration received is recognised as a liability.

         Continuing involvement in transferred assets

B3.2.13 The following are examples of how an entity measures a transferred asset and the
        associated liability under paragraph 3.2.16.

         All assets

         (a)   If a guarantee provided by an entity to pay for default losses on a transferred
               asset prevents the transferred asset from being derecognised to the extent of
               the continuing involvement, the transferred asset at the date of the transfer is
               measured at the lower of (i) the carrying amount of the asset and (ii) the
      maximum amount of the consideration received in the transfer that the
      entity could be required to repay (`the guarantee amount'). The associated
      liability is initially measured at the guarantee amount plus the fair value of
      the guarantee (which is normally the consideration received for the
      guarantee). Subsequently, the initial fair value of the guarantee is recognised
      in profit or loss when (or as) the obligation is satisfied (in accordance with
      the principles of Ind AS 115) and the carrying value of the asset is reduced
      by any loss allowance.

Assets measured at amortised cost

(b)   If a put option obligation written by an entity or call option right held by an
      entity prevents a transferred asset from being derecognised and the entity
      measures the transferred asset at amortised cost, the associated liability is
      measured at its cost (ie the consideration received) adjusted for the
      amortisation of any difference between that cost and the gross carrying
      amount of the transferred asset at the expiration date of the option. For
      example, assume that the gross carrying amount of the asset on the date of
      the transfer is Rs.98 and that the consideration received is Rs.95. The gross
      carrying amount of the asset on the option exercise date will be Rs.100. The
      initial carrying amount of the associated liability is Rs.95 and the difference
      between Rs.95 and Rs.100 is recognised in profit or loss using the effective
      interest method. If the option is exercised, any difference between the
      carrying amount of the associated liability and the exercise price is
      recognised in profit or loss.

Assets measured at fair value

(c)   If a call option right retained by an entity prevents a transferred asset from
      being derecognised and the entity measures the transferred asset at fair
      value, the asset continues to be measured at its fair value. The associated
      liability is measured at (i) the option exercise price less the time value of the
      option if the option is in or at the money, or (ii) the fair value of the
      transferred asset less the time value of the option if the option is out of the
      money. The adjustment to the measurement of the associated liability
      ensures that the net carrying amount of the asset and the associated liability
      is the fair value of the call option right. For example, if the fair value of the
      underlying asset is Rs.80, the option exercise price is Rs.95 and the time
      value of the option is Rs.5, the carrying amount of the associated liability is
      Rs.75 (Rs.80 ­ Rs.5) and the carrying amount of the transferred asset is
      Rs.80 (ie its fair value).

(d)   If a put option written by an entity prevents a transferred asset from being
      derecognised and the entity measures the transferred asset at fair value, the
               associated liability is measured at the option exercise price plus the time
               value of the option. The measurement of the asset at fair value is limited to
               the lower of the fair value and the option exercise price because the entity
               has no right to increases in the fair value of the transferred asset above the
               exercise price of the option. This ensures that the net carrying amount of the
               asset and the associated liability is the fair value of the put option obligation.
               For example, if the fair value of the underlying asset is Rs.120, the option
               exercise price is Rs.100 and the time value of the option is Rs.5, the
               carrying amount of the associated liability is Rs.105 (Rs.100 + Rs.5) and the
               carrying amount of the asset is Rs.100 (in this case the option exercise
               price).

         (e)   If a collar, in the form of a purchased call and written put, prevents a
               transferred asset from being derecognised and the entity measures the asset
               at fair value, it continues to measure the asset at fair value. The associated
               liability is measured at (i) the sum of the call exercise price and fair value of
               the put option less the time value of the call option, if the call option is in or
               at the money, or (ii) the sum of the fair value of the asset and the fair value
               of the put option less the time value of the call option if the call option is out
               of the money. The adjustment to the associated liability ensures that the net
               carrying amount of the asset and the associated liability is the fair value of
               the options held and written by the entity. For example, assume an entity
               transfers a financial asset that is measured at fair value while simultaneously
               purchasing a call with an exercise price of Rs.120 and writing a put with an
               exercise price of Rs.80. Assume also that the fair value of the asset is
               Rs.100 at the date of the transfer. The time value of the put and call are Rs.1
               and Rs.5 respectively. In this case, the entity recognises an asset of Rs.100
               (the fair value of the asset) and a liability of Rs.96 [(RRs.100 + Rs.1) ­
               Rs.5]. This gives a net asset value of Rs.4, which is the fair value of the
               options held and written by the entity.

         All transfers

B3.2.14 To the extent that a transfer of a financial asset does not qualify for derecognition,
        the transferor's contractual rights or obligations related to the transfer are not
        accounted for separately as derivatives if recognising both the derivative and
        either the transferred asset or the liability arising from the transfer would result in
        recognising the same rights or obligations twice. For example, a call option
        retained by the transferor may prevent a transfer of financial assets from being
        accounted for as a sale. In that case, the call option is not separately recognised as
        a derivative asset.

B3.2.15 To the extent that a transfer of a financial asset does not qualify for derecognition,
        the transferee does not recognise the transferred asset as its asset. The transferee
        derecognises the cash or other consideration paid and recognises a receivable from
        the transferor. If the transferor has both a right and an obligation to reacquire
        control of the entire transferred asset for a fixed amount (such as under a
        repurchase agreement), the transferee may measure its receivable at amortised
        cost if it meets the criteria in paragraph 4.1.2.

        Examples

B3.2.16 The following examples illustrate the application of the derecognition principles
        of this Standard.

        (a)   Repurchase agreements and securities lending. If a financial asset is sold
              under an agreement to repurchase it at a fixed price or at the sale price plus
              a lender's return or if it is loaned under an agreement to return it to the
              transferor, it is not derecognised because the transferor retains substantially
              all the risks and rewards of ownership. If the transferee obtains the right to
              sell or pledge the asset, the transferor reclassifies the asset in its statement of
              balance sheet, for example, as a loaned asset or repurchase receivable.

        (b)   Repurchase agreements and securities lending--assets that are
              substantially the same. If a financial asset is sold under an agreement to
              repurchase the same or substantially the same asset at a fixed price or at the
              sale price plus a lender's return or if a financial asset is borrowed or loaned
              under an agreement to return the same or substantially the same asset to the
              transferor, it is not derecognised because the transferor retains substantially
              all the risks and rewards of ownership.

        (c)   Repurchase agreements and securities lending--right of substitution. If a
              repurchase agreement at a fixed repurchase price or a price equal to the sale
              price plus a lender's return, or a similar securities lending transaction,
              provides the transferee with a right to substitute assets that are similar and
              of equal fair value to the transferred asset at the repurchase date, the asset
              sold or lent under a repurchase or securities lending transaction is not
              derecognised because the transferor retains substantially all the risks and
              rewards of ownership.

        (d)   Repurchase right of first refusal at fair value. If an entity sells a financial
              asset and retains only a right of first refusal to repurchase the transferred
              asset at fair value if the transferee subsequently sells it, the entity
              derecognises the asset because it has transferred substantially all the risks
              and rewards of ownership.

        (e)   Wash sale transaction. The repurchase of a financial asset shortly after it has
              been sold is sometimes referred to as a wash sale. Such a repurchase does
      not preclude derecognition provided that the original transaction met the
      derecognition requirements. However, if an agreement to sell a financial
      asset is entered into concurrently with an agreement to repurchase the same
      asset at a fixed price or the sale price plus a lender's return, then the asset is
      not derecognised.

(f)   Put options and call options that are deeply in the money. If a transferred
      financial asset can be called back by the transferor and the call option is
      deeply in the money, the transfer does not qualify for derecognition because
      the transferor has retained substantially all the risks and rewards of
      ownership. Similarly, if the financial asset can be put back by the transferee
      and the put option is deeply in the money, the transfer does not qualify for
      derecognition because the transferor has retained substantially all the risks
      and rewards of ownership.

(g)   Put options and call options that are deeply out of the money. A financial
      asset that is transferred subject only to a deep out-of-the-money put option
      held by the transferee or a deep out-of-the-money call option held by the
      transferor is derecognised. This is because the transferor has transferred
      substantially all the risks and rewards of ownership.

(h)   Readily obtainable assets subject to a call option that is neither deeply in
      the money nor deeply out of the money. If an entity holds a call option on an
      asset that is readily obtainable in the market and the option is neither deeply
      in the money nor deeply out of the money, the asset is derecognised. This is
      because the entity (i) has neither retained nor transferred substantially all the
      risks and rewards of ownership, and (ii) has not retained control. However,
      if the asset is not readily obtainable in the market, derecognition is
      precluded to the extent of the amount of the asset that is subject to the call
      option because the entity has retained control of the asset.

(i)   A not readily obtainable asset subject to a put option written by an entity
      that is neither deeply in the money nor deeply out of the money. If an entity
      transfers a financial asset that is not readily obtainable in the market, and
      writes a put option that is not deeply out of the money, the entity neither
      retains nor transfers substantially all the risks and rewards of ownership
      because of the written put option. The entity retains control of the asset

      if the put option is sufficiently valuable to prevent the transferee from
      selling the asset, in which case the asset continues to be recognised to the
      extent of the transferor's continuing involvement (see paragraph B3.2.9).
      The entity transfers control of the asset if the put option is not sufficiently
      valuable to prevent the transferee from selling the asset, in which case the
      asset is derecognised.
(j)   Assets subject to a fair value put or call option or a forward repurchase
      agreement. A transfer of a financial asset that is subject only to a put or call
      option or a forward repurchase agreement that has an exercise or repurchase
      price equal to the fair value of the financial asset at the time of repurchase
      results in derecognition because of the transfer of substantially all the risks
      and rewards of ownership.

(k)   Cash-settled call or put options. An entity evaluates the transfer of a
      financial asset that is subject to a put or call option or a forward repurchase
      agreement that will be settled net in cash to determine whether it has
      retained or transferred substantially all the risks and rewards of ownership.
      If the entity has not retained substantially all the risks and rewards of
      ownership of the transferred asset, it determines whether it has retained
      control of the transferred asset. That the put or the call or the forward
      repurchase agreement is settled net in cash does not automatically mean that
      the entity has transferred control (see paragraphs B3.2.9 and (g), (h) and (i)
      above).

(l)   Removal of accounts provision. A removal of accounts provision is an
      unconditional repurchase (call) option that gives an entity the right to
      reclaim assets transferred subject to some restrictions. Provided that such an
      option results in the entity neither retaining nor transferring substantially all
      the risks and rewards of ownership, it precludes derecognition only to the
      extent of the amount subject to repurchase (assuming that the transferee
      cannot sell the assets). For example, if the carrying amount and proceeds
      from the transfer of loan assets are Rs.100,000 and any individual loan
      could be called back but the aggregate amount of loans that could be
      repurchased could not exceed Rs.10,000, Rs.90,000 of the loans would
      qualify for derecognition.

(m) Clean-up calls. An entity, which may be a transferor, that services
    transferred assets may hold a clean-up call to purchase remaining
    transferred assets when the amount of outstanding assets falls to a specified
    level at which the cost of servicing those assets becomes burdensome in
    relation to the benefits of servicing. Provided that such a clean-up call
    results in the entity neither retaining nor transferring substantially all the
    risks and rewards of ownership and the transferee cannot sell the assets, it
    precludes derecognition only to the extent of the amount of the assets that is
    subject to the call option.

(n)   Subordinated retained interests and credit guarantees. An entity may
      provide the transferee with credit enhancement by subordinating some or all
      of its interest retained in the transferred asset. Alternatively, an entity may
      provide the transferee with credit enhancement in the form of a credit
      guarantee that could be unlimited or limited to a specified amount. If the
      entity retains substantially all the risks and rewards of ownership of the
      transferred asset, the asset continues to be recognised in its entirety. If the
      entity retains some, but not substantially all, of the risks and rewards of
      ownership and has retained control, derecognition is precluded to the extent
      of the amount of cash or other assets that the entity could be required to pay.

(o)   Total return swaps. An entity may sell a financial asset to a transferee and
      enter into a total return swap with the transferee, whereby all of the interest
      payment cash flows from the underlying asset are remitted to the entity in
      exchange for a fixed payment or variable rate payment and any increases or
      declines in the fair value of the underlying asset are absorbed by the entity.
      In such a case, derecognition of all of the asset is prohibited.

(o)   Interest rate swaps. An entity may transfer to a transferee a fixed rate
      financial asset and enter into an interest rate swap with the transferee to
      receive a fixed interest rate and pay a variable interest rate based on a
      notional amount that is equal to the principal amount of the transferred
      financial asset. The interest rate swap does not preclude derecognition of
      the transferred asset provided the payments on the swap are not conditional
      on payments being made on the transferred asset.

(p)   Amortising interest rate swaps. An entity may transfer to a transferee a
      fixed rate financial asset that is paid off over time, and enter into an
      amortising interest rate swap with the transferee to receive a fixed interest
      rate and pay a variable interest rate based on a notional amount. If the
      notional amount of the swap amortises so that it equals the principal
      amount of the transferred financial asset outstanding at any point in time,
      the swap would generally result in the entity retaining substantial
      prepayment risk, in which case the entity either continues to recognise all
      of the transferred asset or continues to recognise the transferred asset to the
      extent of its continuing involvement. Conversely, if the amortisation of the
      notional amount of the swap is not linked to the principal amount
      outstanding of the transferred asset, such a swap would not result in the
      entity retaining prepayment risk on the asset. Hence, it would not preclude
      derecognition of the transferred asset provided the payments on the swap
      are not conditional on interest payments being made on the transferred asset
      and the swap does not result in the entity retaining any other significant
      risks and rewards of ownership on the transferred asset.

(q)   Write-off. An entity has no reasonable expectations of recovering the
      contractual cash flows on a financial asset in its entirety or a portion
      thereof.
B3.2.17 This paragraph illustrates the application of the continuing involvement approach
        when the entity's continuing involvement is in a part of a financial asset.

        Assume an entity has a portfolio of prepayable loans whose coupon and effective
        interest rate is 10 per cent and whose principal amount and amortised cost is
        Rs.10,000. It enters into a transaction in which, in return for a payment of
        Rs.9,115, the transferee obtains the right to Rs.9,000 of any collections of
        principal plus interest thereon at 9.5 per cent. The entity retains rights to
        Rs.1,000 of any collections of principal plus interest thereon at 10 per cent, plus
        the excess spread of 0.5 per cent on the remaining Rs.9,000 of principal.
        Collections from prepayments are allocated between the entity and the transferee
        proportionately in the ratio of 1:9, but any defaults are deducted from the entity's
        interest of Rs.1,000 until that interest is exhausted. The fair value of the loans at
        the date of the transaction is Rs.10,100 and the fair value of the excess spread of
        0.5 per cent is Rs.40.

        The entity determines that it has transferred some significant risks and rewards
        of ownership (for example, significant prepayment risk) but has also retained
        some significant risks and rewards of ownership (because of its subordinated
        retained interest) and has retained control. It therefore applies the continuing
        involvement approach.

        To apply this Standard, the entity analyses the transaction as (a) a retention of a
        fully proportionate retained interest of Rs.1,000, plus (b) the subordination of
        that retained interest to provide credit enhancement to the transferee for credit
        losses.

        The entity calculates that Rs.9,090 (90% × Rs.10,100) of the consideration
        received of Rs.9,115 represents the consideration for a fully proportionate 90
        per cent share. The remainder of the consideration received (Rs.25) represents
        consideration received for subordinating its retained interest to provide credit
        enhancement to the transferee for credit losses. In addition, the excess spread of
        0.5 per cent represents consideration received for the credit enhancement.
        Accordingly, the total consideration received for the credit enhancement is
        Rs.65 (Rs.25 + Rs.40).

        The entity calculates the gain or loss on the sale of the 90 per cent share of cash
        flows. Assuming that separate fair values of the 90 per cent part transferred and
        the 10 per cent part retained are not available at the date of the transfer, the
        entity allocates the carrying amount of the asset in accordance with paragraph
        3.2.14 of Ind AS 109 as follows:
                                                                    Allocated carrying
                                 Fair value     Percentage               amount
        Portion transferred      9,090      90%                     9,000
        Portion retained         1,010      10%                     1,000
        Total                    10,100                             10,000

        The entity computes its gain or loss on the sale of the 90 per cent share of the
cash flows by deducting the allocated carrying amount of the portion
transferred from the consideration received, ie Rs.90 (Rs.9,090 ­ Rs.9,000).
The carrying amount of the portion retained by the entity is Rs.1,000.

In addition, the entity recognises the continuing involvement that results from the
subordination of its retained interest for credit losses. Accordingly, it recognises
an asset of Rs.1,000 (the maximum amount of the cash flows it would not receive
under the subordination), and an associated liability of Rs.1,065 (which is the
maximum amount of the cash flows it would not receive under the subordination,
ie Rs.1,000 plus the fair value of the subordination of Rs.65).

The entity uses all of the above information to account for the transaction as
follows:
                                                  Debit         Credit
  Original asset                                                9,000
  Asset recognised for subordination or the
  residual interest                               1,000
  Asset for the consideration received in the
  form of excess spread                           40
  Profit or loss (gain on transfer)                             90
  Liability                                                     1,065
  Cash received                                   9,115

 Total                                                10,155         10,155

Immediately following the transaction, the carrying amount of the asset is
Rs.2,040 comprising Rs.1,000, representing the allocated cost of the portion
retained, and Rs.1,040, representing the entity's additional continuing
involvement from the subordination of its retained interest for credit losses
(which includes the excess spread of Rs.40).

In subsequent periods, the entity recognises the consideration received for the
credit enhancement (Rs.65) on a time proportion basis, accrues interest on the
recognised asset using the effective interest method and recognises any
impairment losses on the recognised assets. As an example of the latter, assume
that in the following year there is an impairment loss on the underlying loans of
Rs.300. The entity reduces its recognised asset by Rs.600 (Rs.300 relating to its
retained interest and Rs.300 relating to the additional continuing involvement that
arises from the subordination of its retained interest for impairment losses), and
reduces its recognised liability by Rs.300. The net result is a charge to profit or
loss for impairment losses of Rs.300.




         Derecognition of financial liabilities (Section 3.3)
B3.3.1 A financial liability (or part of it) is extinguished when the debtor either:

         (a)   discharges the liability (or part of it) by paying the creditor, normally with
               cash, other financial assets, goods or services; or

         (b)   is legally released from primary responsibility for the liability (or part of it)
               either by process of law or by the creditor. (If the debtor has given a
               guarantee this condition may still be met.)

B3.3.2 If an issuer of a debt instrument repurchases that instrument, the debt is
        extinguished even if the issuer is a market maker in that instrument or intends to
        resell it in the near term.

B3.3.3 Payment to a third party, including a trust (sometimes called `in-substance
       defeasance'), does not, by itself, relieve the debtor of its primary obligation to the
       creditor, in the absence of legal release.

B3.3.4 If a debtor pays a third party to assume an obligation and notifies its creditor that
         the third party has assumed its debt obligation, the debtor does not derecognise the
         debt obligation unless the condition in paragraph B3.3.1(b) is met. If the debtor
         pays a third party to assume an obligation and obtains a legal release from its
         creditor, the debtor has extinguished the debt. However, if the debtor agrees to
         make payments on the debt to the third party or direct to its original creditor, the
         debtor recognises a new debt obligation to the third party.

B3.3.5 Although legal release, whether judicially or by the creditor, results in
       derecognition of a liability, the entity may recognise a new liability if the
       derecognition criteria in paragraphs 3.2.1­3.2.23 are not met for the financial
       assets transferred. If those criteria are not met, the transferred assets are not
       derecognised, and the entity recognises a new liability relating to the transferred
       assets.

B3.3.6 For the purpose of paragraph 3.3.2, the terms are substantially different if the
        discounted present value of the cash flows under the new terms, including any
        fees paid net of any fees received and discounted using the original effective
        interest rate, is at least 10 per cent different from the discounted present value of
        the remaining cash flows of the original financial liability. If an exchange of debt
        instruments or modification of terms is accounted for as an extinguishment, any
        costs or fees incurred are recognised as part of the gain or loss on the
        extinguishment. If the exchange or modification is not accounted for as an
        extinguishment, any costs or fees incurred adjust the carrying amount of the
        liability and are amortised over the remaining term of the modified liability.

B3.3.7 In some cases, a creditor releases a debtor from its present obligation to make
        payments, but the debtor assumes a guarantee obligation to pay if the party
        assuming primary responsibility defaults. In these circumstances the debtor:

        (a)   recognises a new financial liability based on the fair value of its obligation
              for the guarantee, and

        (b)   recognises a gain or loss based on the difference between (i) any proceeds
              paid and (ii) the carrying amount of the original financial liability less the
              fair value of the new financial liability.

        Classification (Chapter 4)

                 Classification of financial assets (Section 4.1)
                 The entity's business model for managing financial assets

B4.1.1 Paragraph 4.1.1(a) requires an entity to classify financial assets on the basis of the
       entity's business model for managing the financial assets, unless paragraph 4.1.5
       applies. An entity assesses whether its financial assets meet the condition in
       paragraph 4.1.2(a) or the condition in paragraph 4.1.2A(a) on the basis of the
       business model as determined by the entity's key management personnel (as
       defined in Ind AS 24 Related Party Disclosures).

B4.1.2 An entity's business model is determined at a level that reflects how groups of
       financial assets are managed together to achieve a particular business objective.
       The entity's business model does not depend on management's intentions for an
       individual instrument. Accordingly, this condition is not an instrument-by-
       instrument approach to classification and should be determined on a higher level of
       aggregation. However, a single entity may have more than one business model for
       managing its financial instruments. Consequently, classification need not be
       determined at the reporting entity level. For example, an entity may hold a
       portfolio of investments that it manages in order to collect contractual cash flows
       and another portfolio of investments that it manages in order to trade to realise fair
       value changes. Similarly, in some circumstances, it may be appropriate to separate
       a portfolio of financial assets into subportfolios in order to reflect the level at
       which an entity manages those financial assets. For example, that may be the case
       if an entity originates or purchases a portfolio of mortgage loans and manages
       some of the loans with an objective of collecting contractual cash flows and
       manages the other loans with an objective of selling them.

B4.1.2A An entity's business model refers to how an entity manages its financial assets in
      order to generate cash flows. That is, the entity's business model determines
      whether cash flows will result from collecting contractual cash flows, selling
      financial assets or both. Consequently, this assessment is not performed on the
      basis of scenarios that the entity does not reasonably expect to occur, such as so-
       called `worst case' or `stress case' scenarios. For example, if an entity expects that
       it will sell a particular portfolio of financial assets only in a stress case scenario,
       that scenario would not affect the entity's assessment of the business model for
       those assets if the entity reasonably expects that such a scenario will not occur. If
       cash flows are realised in a way that is different from the entity's expectations at
       the date that the entity assessed the business model (for example, if the entity sells
       more or fewer financial assets than it expected when it classified the assets), that
       does not give rise to a prior period error in the entity's financial statements (see Ind
       AS 8) nor does it change the classification of the remaining financial assets held in
       that business model (ie those assets that the entity recognised in prior periods and
       still holds) as long as the entity considered all relevant information that was
       available at the time that it made the business model assessment. However, when
       an entity assesses the business model for newly originated or newly purchased
       financial assets, it must consider information about how cash flows were realised
       in the past, along with all other relevant information.

B4.1.2B An entity's business model for managing financial assets is a matter of fact and
       not merely an assertion. It is typically observable through the activities that the
       entity undertakes to achieve the objective of the business model. An entity will
       need to use judgement when it assesses its business model for managing financial
       assets and that assessment is not determined by a single factor or activity. Instead,
       the entity must consider all relevant evidence that is available at the date of the
       assessment. Such relevant evidence includes, but is not limited to:

        (a)   how the performance of the business model and the financial assets held
              within that business model are evaluated and reported to the entity's key
              management personnel;

        (b)   the risks that affect the performance of the business model (and the financial
              assets held within that business model) and, in particular, the way in which
              those risks are managed; and

        (c)   how managers of the business are compensated (for example, whether the
              compensation is based on the fair value of the assets managed or on the
              contractual cash flows collected).

        A business model whose objective is to hold assets in order to collect contractual
        cash flows

B4.1.2C Financial assets that are held within a business model whose objective is to hold
        assets in order to collect contractual cash flows are managed to realise cash flows
        by collecting contractual payments over the life of the instrument. That is, the
        entity manages the assets held within the portfolio to collect those particular
        contractual cash flows (instead of managing the overall return on the portfolio by
        both holding and selling assets). In determining whether cash flows are going to
        be realised by collecting the financial assets' contractual cash flows, it is
        necessary to consider the frequency, value and timing of sales in prior periods, the
        reasons for those sales and expectations about future sales activity. However sales
        in themselves do not determine the business model and therefore cannot be
        considered in isolation. Instead, information about past sales and expectations
        about future sales provide evidence related to how the entity's stated objective for
        managing the financial assets is achieved and, specifically, how cash flows are
        realised. An entity must consider information about past sales within the context
        of the reasons for those sales and the conditions that existed at that time as
        compared to current conditions.

B4.1.3 Although the objective of an entity's business model may be to hold financial assets
        in order to collect contractual cash flows, the entity need not hold all of those
        instruments until maturity. Thus an entity's business model can be to hold
        financial assets to collect contractual cash flows even when sales of financial
        assets occur or are expected to occur in the future.

B4.1.3A The business model may be to hold assets to collect contractual cash flows even if
       the entity sells financial assets when there is an increase in the assets' credit risk.
       To determine whether there has been an increase in the assets' credit risk, the
       entity considers reasonable and supportable information, including forward
       looking information. Irrespective of their frequency and value, sales due to an
       increase in the assets' credit risk are not inconsistent with a business model whose
       objective is to hold financial assets to collect contractual cash flows because the
       credit quality of financial assets is relevant to the entity's ability to collect
       contractual cash flows. Credit risk management activities that are aimed at
       minimising potential credit losses due to credit deterioration are integral to such a
       business model. Selling a financial asset because it no longer meets the credit
       criteria specified in the entity's documented investment policy is an example of a
       sale that has occurred due to an increase in credit risk. However, in the absence of
       such a policy, the entity may demonstrate in other ways that the sale occurred due
       to an increase in credit risk.

B4.1.3B Sales that occur for other reasons, such as sales made to manage credit
       concentration risk (without an increase in the assets' credit risk), may also be
       consistent with a business model whose objective is to hold financial assets in
       order to collect contractual cash flows. In particular, such sales may be consistent
       with a business model whose objective is to hold financial assets in order to
       collect contractual cash flows if those sales are infrequent (even if significant in
       value) or insignificant in value both individually and in aggregate (even if
       frequent). If more than an infrequent number of such sales are made out of a
       portfolio and those sales are more than insignificant in value (either individually
       or in aggregate), the entity needs to assess whether and how such sales are
        consistent with an objective of collecting contractual cash flows. Whether a third
        party imposes the requirement to sell the financial assets, or that activity is at the
        entity's discretion, is not relevant to this assessment. An increase in the frequency
        or value of sales in a particular period is not necessarily inconsistent with an
        objective to hold financial assets in order to collect contractual cash flows, if an
        entity can explain the reasons for those sales and demonstrate why those sales do
        not reflect a change in the entity's business model. In addition, sales may be
        consistent with the objective of holding financial assets in order to collect
        contractual cash flows if the sales are made close to the maturity of the financial
        assets and the proceeds from the sales approximate the collection of the remaining
        contractual cash flows.

B4.1.4 The following are examples of when the objective of an entity's business model
        may be to hold financial assets to collect the contractual cash flows. This list of
        examples is not exhaustive. Furthermore, the examples are not intended to discuss
        all factors that may be relevant to the assessment of the entity's business model
        nor specify the relative importance of the factors.



         Example                                   Analysis
         An entity holds investments to collect Although the entity considers, among
         their contractual cash flows. The other information, the financial assets'
         funding needs of the entity are           fair values from a liquidity perspective
         predictable and the maturity of its       (ie the cash amount that would be
         financial assets is matched to the realised if the entity needs to sell
         entity's estimated funding needs.         assets), the entity's objective is to hold
                                                   the financial assets in order to collect
         The entity performs credit risk the contractual cash flows. Sales would
         management activities with the not contradict that objective if they
         objective of minimising credit losses. were in response to an increase in the
         In the past, sales have typically assets' credit risk, for example if the
         occurred when the financial assets' assets no longer meet the credit criteria
         credit risk has increased such that the specified in the entity's documented
         assets no longer meet the credit criteria investment policy. Infrequent sales
         specified in the entity's documented resulting from unanticipated funding
         investment policy. In addition, needs (eg in a stress case scenario) also
         infrequent sales have occurred as a would not contradict that objective,
         result of unanticipated funding needs.    even if such sales are significant in
         Reports to key management personnel value.
         focus on the credit quality of the
         financial assets and the contractual
         return. The entity also monitors fair
         values of the financial assets, among
         other information.

        Example 2                        Analysis
        An entity's business model is to The objective of the entity's business
purchase portfolios of financial assets, model is to hold the financial assets
such as loans. Those portfolios may or in order to collect the contractual
may not include financial assets that are cash flows.
credit impaired.
                                           The same analysis would apply even
If payment on the loans is not made on if the entity does not expect to
a timely basis, the entity attempts to receive all of the contractual cash
realise the contractual cash flows flows (eg some of the financial
through various means--for example, assets are credit impaired at initial
by contacting the debtor by mail, recognition).
telephone or other methods. The
entity's objective is to collect the Moreover, the fact that the entity enters
contractual cash flows and the entity into derivatives to modify the cash
does not manage any of the loans in this flows of the portfolio does not in itself
portfolio with an objective of realising change the entity's business model
cash flows by selling them.

In some cases, the entity enters into
interest rate swaps to change the
interest rate on particular financial
assets in a portfolio from a floating
interest rate to a fixed interest rate.

                                          Analysis

Example 3                                 The consolidated group originated the
                                          loans with the objective of holding
An entity has a business model with       them to collect the contractual cash
the objective of originating loans to     flows.
customers and subsequently selling
those loans to a securitisation vehicle. However, the originating entity has an
The securitisation vehicle issues objective of realising cash flows on the
instruments to investors.                loan portfolio by selling the loans to the
                                         securitisation vehicle, so for the
The originating entity controls the purposes of its separate financial
securitisation vehicle and thus statements it would not be considered
consolidates it.                         to be managing this portfolio in order to
                                         collect the contractual cash flows.
The securitisation vehicle collects the
contractual cash flows from the loans
and passes them on to its investors.

It is assumed for the purposes of this
example that the loans continue to be
recognised in the consolidated balance
sheet     because   they     are   not
derecognised by the securitisation
vehicle.
Example 4                              Analysis
         A financial institution holds financial      The objective of the entity's business
         assets to meet liquidity needs in a          model is to hold the financial assets to
         `stress case' scenario (eg, a run on the     collect contractual cash flows.
         bank's deposits). The entity does not
         anticipate selling these assets except       The analysis would not change even if
         in such scenarios.                           during a previous stress case scenario
                                                      the entity had sales that were
          The entity monitors the credit quality      significant in value in order to meet its
          of the financial assets and its objective   liquidity needs. Similarly, recurring
          in managing the financial assets is to      sales activity that is insignificant in
          collect the contractual cash flows. The     value is not inconsistent with holding
          entity evaluates the performance of the     financial assets to collect contractual
          assets on the basis of interest revenue     cash flows.
          earned and credit losses realised.
                                                      In contrast, if an entity holds financial
          However, the entity also monitors the       assets to meet its everyday liquidity
          fair value of the financial assets from a   needs and meeting that objective
          liquidity perspective to ensure that the    involves frequent sales that are
          cash amount that would be realised if       significant in value, the objective of
          the entity needed to sell the assets in a   the entity's business model is not to
          stress case scenario would be sufficient    hold the financial assets to collect
          to meet the entity's liquidity needs.       contractual cash flows.
          Periodically, the entity makes sales that   Similarly, if the entity is required by its
          are insignificant in value to               regulator to routinely sell financial
          demonstrate liquidity.                      assets to demonstrate that the assets are
                                                      liquid, and the value of the assets sold
                                                      is significant, the entity's business
                                                      model is not to hold financial assets to
                                                      collect contractual cash flows. Whether
                                                      a third party imposes the requirement
                                                      to sell the financial assets, or that
                                                      activity is at the entity's discretion, is
                                                      not relevant to the analysis.


         A business model whose objective is achieved by both collecting contractual cash
         flows and selling financial assets

B4.1.4A An entity may hold financial assets in a business model whose objective is
        achieved by both collecting contractual cash flows and selling financial assets. In
        this type of business model, the entity's key management personnel have made a
        decision that both collecting contractual cash flows and selling financial assets are
        integral to achieving the objective of the business model. There are various
        objectives that may be consistent with this type of business model. For example,
        the objective of the business model may be to manage everyday liquidity needs, to
        maintain a particular interest yield profile or to match the duration of the financial
        assets to the duration of the liabilities that those assets are funding. To achieve
        such an objective, the entity will both collect contractual cash flows and sell
        financial assets.

B4.1.4B Compared to a business model whose objective is to hold financial assets to
       collect contractual cash flows, this business model will typically involve greater
       frequency and value of sales. This is because selling financial assets is integral to
       achieving the business model's objective instead of being only incidental to it.
       However, there is no threshold for the frequency or value of sales that must occur
       in this business model because both collecting contractual cash flows and selling
       financial assets are integral to achieving its objective.

B4.1.4C The following are examples of when the objective of the entity's business model
        may be achieved by both collecting contractual cash flows and selling financial
        assets. This list of examples is not exhaustive. Furthermore, the examples are not
        intended to describe all the factors that may be relevant to the assessment of the
        entity's business model nor specify the relative importance of the factors.
       Example 5                                     Analysis
          An      entity     anticipates     capital The objective of the business model is
          expenditure in a few years. The entity achieved by both collecting contractual
          invests its excess cash in short and cash flows and selling financial assets.
          long-term financial assets so that it can The entity will make decisions on an
          fund the expenditure when the need ongoing basis about whether collecting
          arises. Many of the financial assets contractual cash flows or selling
          have contractual lives that exceed the financial assets will maximise the
          entity's anticipated investment period.     return on the portfolio until the need
                                                      arises for the invested cash.
          The entity will hold financial assets to
          collect the contractual cash flows and, In contrast, consider an entity that
          when an opportunity arises, it will sell anticipates a cash outflow in five years
          financial assets to re-invest the cash in to fund capital expenditure and invests
          financial assets with a higher return.      excess cash in short-term financial
                                                      assets. When the investments mature,
          The managers responsible for the the entity reinvests the cash in new
          portfolio are remunerated based on the short-term financial assets. The entity
          overall return generated by the maintains this strategy until the funds
          portfolio.                                  are needed, at which time the entity
                                                      uses the proceeds from the maturing
                                                      financial assets to fund the capital
                                                      expenditure. Only sales that are
                                                      insignificant in value occur before
                                                      maturity (unless there is an increase in
                                                      credit risk). The objective of this
                                                      contrasting business model is to hold
                                                      financial assets to collect contractual
                                                      cash flows.
                                                     
        Example 6                                    Analysis

        A financial institution holds financial      The objective of the business model is
         assets to meet its everyday liquidity         to maximise the return on the portfolio
         needs. The entity seeks to minimise the       to meet everyday liquidity needs and
         costs of managing those liquidity             the entity achieves that objective by
         needs and therefore actively manages          both collecting contractual cash flows
         the return on the portfolio. That return      and selling financial assets. In other
         consists of collecting contractual            words, both collecting contractual cash
         payments as well as gains and losses          flows and selling financial assets are
         from the sale of financial assets.            integral to achieving the business
                                                       model's objective.
         As a result, the entity holds financial
         assets to collect contractual cash flows
         and sells financial assets to reinvest in
         higher yielding financial assets or to
         better match the duration of its
         liabilities. In the past, this strategy has
         resulted in frequent sales activity and
         such sales have been significant in
         value. This activity is expected to
         continue in the future.

         Example 7                                     Analysis
         An insurer holds financial assets in
         order to fund insurance contract              The objective of the business model is
         liabilities. The insurer uses the             to fund the insurance contract
         proceeds from the contractual cash            liabilities. To achieve this objective,
         flows on the financial assets to settle       the entity collects contractual cash
         insurance contract liabilities as they        flows as they come due and sells
         come due. To ensure that the                  financial assets to maintain the desired
         contractual cash flows from the               profile of the asset portfolio.
         financial assets are sufficient to settle
         those liabilities, the insurer undertakes     Thus both collecting contractual cash
         significant buying and selling activity       flows and selling financial assets are
         on a regular basis to rebalance its           integral to achieving the business
         portfolio of assets and to meet cash          model's objective.
         flow needs as they arise.

                 Other business models

B4.1.5 Financial assets are measured at fair value through profit or loss if they are not
       held within a business model whose objective is to hold assets to collect
       contractual cash flows or within a business model whose objective is achieved by
       both collecting contractual cash flows and selling financial assets (but see also
       paragraph 5.7.5). One business model that results in measurement at fair value
       through profit or loss is one in which an entity manages the financial assets with
       the objective of realising cash flows through the sale of the assets. The entity
       makes decisions based on the assets' fair values and manages the assets to realise
       those fair values. In this case, the entity's objective will typically result in active
       buying and selling. Even though the entity will collect contractual cash flows
         while it holds the financial assets, the objective of such a business model is not
         achieved by both collecting contractual cash flows and selling financial assets.
         This is because the collection of contractual cash flows is not integral to achieving
         the business model's objective; instead, it is incidental to it.

B4.1.6 A portfolio of financial assets that is managed and whose performance is
       evaluated on a fair value basis (as described in paragraph 4.2.2(b)) is neither held
       to collect contractual cash flows nor held both to collect contractual cash flows
       and to sell financial assets. The entity is primarily focused on fair value
       information and uses that information to assess the assets' performance and to
       make decisions. In addition, a portfolio of financial assets that meets the definition
       of held for trading is not held to collect contractual cash flows or held both to
       collect contractual cash flows and to sell financial assets. For such portfolios, the
       collection of contractual cash flows is only incidental to achieving the business
       model's objective. Consequently, such portfolios of financial assets must be
       measured at fair value through profit or loss.

         Contractual cash flows that are solely payments of principal and interest on
         the principal amount outstanding

B4.1.7 Paragraph 4.1.1(b) requires an entity to classify a financial on the basis of its
        contractual cash flow characteristics if the financial asset is held within a business
        model whose objective is to hold assets to collect contractual cash flows or within
        a business model whose objective is achieved by both collecting contractual cash
        flows and selling financial assets, unless paragraph 4.1.5 applies. To do so, the
        condition in paragraphs 4.1.2(b) and 4.1.2A(b) requires an entity to determine
        whether the asset's contractual cash flows are solely payments of principal and
        interest on the principal amount outstanding.

B4.1.7A Contractual cash flows that are solely payments of principal and interest on the
        principal amount outstanding are consistent with a basic lending arrangement. In a
        basic lending arrangement, consideration for the time value of money (see
        paragraphs B4.1.9A­B4.1.9E) and credit risk are typically the most significant
        elements of interest. However, in such an arrangement, interest can also include
        consideration for other basic lending risks (for example, liquidity risk) and costs
        (for example, administrative costs) associated with holding the financial asset for
        a particular period of time. In addition, interest can include a profit margin that is
        consistent with a basic lending arrangement. In extreme economic circumstances,
        interest can be negative if, for example, the holder of a financial asset either
        explicitly or implicitly pays for the deposit of its money for a particular period of
        time (and that fee exceeds the consideration that the holder receives for the time
        value of money, credit risk and other basic lending risks and costs). However,
        contractual terms that introduce exposure to risks or volatility in the contractual
        cash flows that is unrelated to a basic lending arrangement, such as exposure to
         changes in equity prices or commodity prices, do not give rise to contractual cash
         flows that are solely payments of principal and interest on the principal amount
         outstanding. An originated or a purchased financial asset can be a basic lending
         arrangement irrespective of whether it is a loan in its legal form.

B4.1.7B In accordance with paragraph 4.1.3(a), principal is the fair value of the financial
        asset at initial recognition. However that principal amount may change over the
        life of the financial asset (for example, if there are repayments of principal).

B4.1.8 An entity shall assess whether contractual cash flows are solely payments of
       principal and interest on the principal amount outstanding for the currency in
       which the financial asset is denominated.

B4.1.9 Leverage is a contractual cash flow characteristic of some financial assets.
       Leverage increases the variability of the contractual cash flows with the result that
       they do not have the economic characteristics of interest. Stand-alone option,
       forward and swap contracts are examples of financial assets that include such
       leverage. Thus, such contracts do not meet the condition in paragraphs 4.1.2(b)
       and 4.1.2A(b) and cannot be subsequently measured at amortised cost or fair
       value through other comprehensive income.

         Consideration for the time value of money

B4.1.9A Time value of money is the element of interest that provides consideration for
       only the passage of time. That is, the time value of money element does not
       provide consideration for other risks or costs associated with holding the financial
       asset. In order to assess whether the element provides consideration for only the
       passage of time, an entity applies judgement and considers relevant factors such as
       the currency in which the financial asset is denominated and the period for which
       the interest rate is set.

B4.1.9B However, in some cases, the time value of money element may be modified (ie
        imperfect). That would be the case, for example, if a financial asset's interest rate
        is periodically reset but the frequency of that reset does not match the tenor of the
        interest rate (for example, the interest rate resets every month to a one-year rate)
        or if a financial asset's interest rate is periodically reset to an average of particular
        short- and long-term interest rates. In such cases, an entity must assess the
        modification to determine whether the contractual cash flows represent solely
        payments of principal and interest on the principal amount outstanding. In some
        circumstances, the entity may be able to make that determination by performing a
        qualitative assessment of the time value of money element whereas, in other
        circumstances, it may be necessary to perform a quantitative assessment.

B4.1.9C When assessing a modified time value of money element, the objective is to
         determine how different the contractual (undiscounted) cash flows could be from
         the (undiscounted) cash flows that would arise if the time value of money element
         was not modified (the benchmark cash flows). For example, if the financial asset
         under assessment contains a variable interest rate that is reset every month to a
         one-year interest rate, the entity would compare that financial asset to a financial
         instrument with identical contractual terms and the identical credit risk except the
         variable interest rate is reset monthly to a one-month interest rate. If the modified
         time value of money element could result in contractual (undiscounted) cash flows
         that are significantly different from the (undiscounted) benchmark cash flows, the
         financial asset does not meet the condition in paragraphs 4.1.2(b) and 4.1.2A(b).
         To make this determination, the entity must consider the effect of the modified
         time value of money element in each reporting period and cumulatively over the
         life of the financial instrument. The reason for the interest rate being set in this
         way is not relevant to the analysis. If it is clear, with little or no analysis, whether
         the contractual (undiscounted) cash flows on the financial asset under the
         assessment could (or could not) be significantly different from the (undiscounted)
         benchmark cash flows, an entity need not perform a detailed assessment.

B4.1.9D When assessing a modified time value of money element, an entity must consider
        factors that could affect future contractual cash flows. For example, if an entity is
        assessing a bond with a five-year term and the variable interest rate is reset every
        six months to a five-year rate, the entity cannot conclude that the contractual cash
        flows are solely payments of principal and interest on the principal amount
        outstanding simply because the interest rate curve at the time of the assessment is
        such that the difference between a five-year interest rate and a six-month interest
        rate is not significant. Instead, the entity must also consider whether the
        relationship between the five-year interest rate and the six-month interest rate
        could change over the life of the instrument such that the contractual
        (undiscounted) cash flows over the life of the instrument could be significantly
        different from the (undiscounted) benchmark cash flows. However, an entity must
        consider only reasonably possible scenarios instead of every possible scenario. If
        an entity concludes that the contractual (undiscounted) cash flows could be
        significantly different from the (undiscounted) benchmark cash flows, the
        financial asset does not meet the condition in paragraphs 4.1.2(b) and 4.1.2A(b)
        and therefore cannot be measured at amortised cost or fair value through other
        comprehensive income.

B4.1.9E In some jurisdictions, the government or a regulatory authority sets interest rates.
        For example, such government regulation of interest rates may be part of a broad
        macroeconomic policy or it may be introduced to encourage entities to invest in a
        particular sector of the economy. In some of these cases, the objective of the time
        value of money element is not to provide consideration for only the passage of
        time. However, despite paragraphs B4.1.9A­B4.1.9D, a regulated interest rate
        shall be considered a proxy for the time value of money element for the purpose
         of applying the condition in paragraphs 4.1.2(b) and 4.1.2A(b) if that regulated
         interest rate provides consideration that is broadly consistent with the passage of
         time and does not provide exposure to risks or volatility in the contractual cash
         flows that are inconsistent with a basic lending arrangement.

         Contractual terms that change the timing or amount of contractual cash
         flows

B4.1.10 If a financial asset contains a contractual term that could change the timing or
        amount of contractual cash flows (for example, if the asset can be prepaid before
        maturity or its term can be extended), the entity must determine whether the
        contractual cash flows that could arise over the life of the instrument due to that
        contractual term are solely payments of principal and interest on the principal
        amount outstanding. To make this determination, the entity must assess the
        contractual cash flows that could arise both before, and after, the change in
        contractual cash flows. The entity may also need to assess the nature of any
        contingent event (ie the trigger) that would change the timing or amount of the
        contractual cash flows. While the nature of the contingent event in itself is not a
        determinative factor in assessing whether the contractual cash flows are solely
        payments of principal and interest, it may be an indicator. For example, compare a
        financial instrument with an interest rate that is reset to a higher rate if the debtor
        misses a particular number of payments to a financial instrument with an interest
        rate that is reset to a higher rate if a specified equity index reaches a particular
        level. It is more likely in the former case that the contractual cash flows over the
        life of the instrument will be solely payments of principal and interest on the
        principal amount outstanding because of the relationship between missed
        payments and an increase in credit risk. (See also paragraph B4.1.18.)

B4.1.11 The following are examples of contractual terms that result in contractual cash
        flows that are solely payments of principal and interest on the principal amount
        outstanding:

         (a)   a variable interest rate that consists of consideration for the time value of
               money, the credit risk associated with the principal amount outstanding
               during a particular period of time (the consideration for credit risk may be
               determined at initial recognition only, and so may be fixed) and other basic
               lending risks and costs, as well as a profit margin;

         (b)   a contractual term that permits the issuer (ie the debtor) to prepay a debt
               instrument or permits the holder (ie the creditor) to put a debt instrument
               back to the issuer before maturity and the prepayment amount substantially
               represents unpaid amounts of principal and interest on the principal amount
               outstanding, which may include reasonable additional compensation for the
               early termination of the contract; and
        (c)   a contractual term that permits the issuer or the holder to extend the
              contractual term of a debt instrument (ie an extension option) and the terms
              of the extension option result in contractual cash flows during the extension
              period that are solely payments of principal and interest on the principal
              amount outstanding, which may include reasonable additional compensation
              for the extension of the contract.

B4.1.12 Despite paragraph B4.1.10, a financial asset that would otherwise meet the
        condition in paragraphs 4.1.2(b) and 4.1.2A(b) but does not do so only as a result
        of a contractual term that permits (or requires) the issuer to prepay a debt
        instrument or permits (or requires) the holder to put a debt instrument back to the
        issuer before maturity is eligible to be measured at amortised cost or fair value
        through other comprehensive income (subject to meeting the condition in
        paragraph 4.1.2(a) or the condition in paragraph 4.1.2A(a)) if:

        (a)   the entity acquires or originates the financial asset at a premium or discount
              to the contractual par amount;
        (b)   the prepayment amount substantially represents the contractual par amount
              and accrued (but unpaid) contractual interest, which may include reasonable
              additional compensation for the early termination of the contract; and

        (c)   when the entity initially recognises the financial asset, the fair value of the
              prepayment feature is insignificant.

B4.1.13 The following examples illustrate contractual cash flows that are solely payments
        of principal and interest on the principal amount outstanding. This list of
        examples is not exhaustive.

         Instrument A                               Analysis

         Instrument A is a bond with a stated       The contractual cash flows are solely
         maturity date. Payments of principal       payments of principal and interest on
         and interest on the principal amount       the principal amount outstanding.
         outstanding are linked to an inflation     Linking payments of principal and
         index of the currency in which the         interest on the principal amount
         instrument is issued. The inflation        outstanding to an unleveraged inflation
         link is not leveraged and the principal    index resets the time value of money to
         is protected.                              a current level. In other words, the
                                                    interest rate on the instrument reflects
                                                    `real' interest. Thus, the interest
                                                    amounts are consideration for the time
                                                    value of money on the principal
                                                    amount outstanding.

                                                   However, if the interest payments were
                                         indexed to another variable such as the
                                         debtor's performance (eg the debtor's
                                         net income) or an equity index, the
                                         contractual cash flows are not payments
                                         of principal and interest on the principal
                                         amount outstanding (unless the
                                         indexing to the debtor's performance
                                         results in an adjustment that only
                                         compensates the holder for changes in
                                         the credit risk of the instrument, such
                                         that contractual cash flows are solely
                                         payments of principal and interest).
                                         That is because the contractual cash
                                         flows reflect a return that is inconsistent
                                         with a basic lending arrangement (see
                                         paragraph B4.1.7A).
Instrument B                              Analysis

Instrument B is a variable interest      The contractual cash flows are solely
rate instrument with a stated maturity   payments of principal and interest on
date that permits the borrower to        the principal amount outstanding
choose the market interest rate on an    as long as the interest paid over the life
ongoing basis. For example, at each      of the instrument reflects consideration
interest rate reset date, the borrower   for the time value of money, for the
can choose to pay three-month            credit risk associated with the
LIBOR for a three-month term or          instrument and for other basic lending
one-month LIBOR for a one-month          risks and costs, as well as a profit
term.                                    margin (see paragraph B4.1.7A). The
                                         fact that the LIBOR interest rate is
                                         reset during the life of the instrument
                                         does not in itself disqualify the
                                         instrument.

                                         However, if the borrower is able to
                                         choose to pay a one-month interest rate
                                         that is reset every three months, the
                                         interest rate is reset with a frequency
                                         that does not match the tenor of the
                                         interest rate. Consequently, the time
                                         value of money element is modified.
                                         Similarly, if an instrument has a
                                         contractual interest rate that is based on
                                         a term that can exceed the instrument's
                                         remaining life (for example, if an
                                         instrument with a five-year maturity
                                         pays a variable rate that is reset
                                         periodically but always reflects a five-
                                         year maturity), the time value of
                                         money element is modified. That is
                                         because the interest payable in each
                                       period is disconnected from the interest
                                       period.

                                       In such cases, the entity must
                                       qualitatively or quantitatively assess
                                       the contractual cash flows against
                                       those on an instrument that is identical
                                       in all respects except the tenor of the
                                       interest rate matches the interest period
                                       to determine if the cash flows are
                                       solely payments of principal and
                                       interest on the principal amount
                                       outstanding. (But see paragraph
                                       B4.1.9E for guidance on regulated
                                       interest rates.)

                                       For example, in assessing a bond with
                                       a five-year term that pays a variable
                                       rate that is reset every six months but
                                       always reflects a five-year maturity, an
                                       entity considers the contractual cash
                                       flows on an instrument that resets
                                       every
                                       six months to a six-month interest rate
                                       but is otherwise identical.

                                       The same analysis would apply if the
                                       borrower is able to choose between the
                                       lender's various published interest rates
                                       (eg the borrower can choose between
                                       the lender's published one-month
                                       variable interest rate and the lender's
                                       published three-month variable interest
                                       rate).
Instrument C                           Analysis
                                        The contractual cash flows of both:
Instrument C is a bond with a stated
maturity date and pays a variable      (a)   an instrument that has a fixed
market interest rate. That variable          interest rate and
interest rate is capped.               (b)   an instrument that has a variable
                                             interest rate

                                       are payments of principal and interest
                                       on the principal amount outstanding as
                                       long    as    the   interest   reflects
                                       consideration for the time value of
                                       money, for the credit risk associated
                                       with the instrument during the term of
                                       the instrument and for other basic
                                       lending risks and costs, as well as a
                                            profit margin. (See paragraph B4.1.7A)

                                            Consequently, an instrument that is a
                                            combination of (a) and (b) (eg a bond
                                            with an interest rate cap) can have cash
                                            flows that are solely payments of
                                            principal and interest on the principal
                                            amount outstanding. Such a contractual
                                            term may reduce cash flow variability
                                            by setting a limit on a variable interest
                                            rate (eg an interest rate cap or floor) or
                                            increase the cash flow variability
                                            because a fixed rate becomes variable.
Instrument D                                Analysis

Instrument D is a full recourse loan        The fact that a full recourse loan is
and is secured by collateral.               collateralised does not in itself affect
                                            the analysis of whether the contractual
                                            cash flows are solely payments of
                                            principal and interest on the principal
                                            amount outstanding.
Instrument E                                Analysis
Instrument E is issued by a regulated
bank and has a stated maturity date.        The holder would analyse the
The instrument pays a fixed interest        contractual terms of the financial
rate and all contractual cash flows are     instrument to determine whether they
non-discretionary.                          give rise to cash flows that are solely
                                            payments of principal and interest on
However, the issuer is subject to           the principal amount outstanding and
legislation that permits or requires a      thus are consistent with a basic lending
national resolving authority to impose      arrangement.
losses on holders of particular
instruments, including Instrument E, in     That analysis would not consider the
particular circumstances. For example,      payments that arise only as a result of
the national resolving authority has the    the national resolving authority's
power to write down the par amount of       power to impose losses on the holders
Instrument E or to convert it into a        of Instrument E. That is because that
fixed number of the issuer's ordinary       power, and the resulting payments, are
shares if the national resolving            not contractual terms of the financial
authority determines that the issuer is     instrument.
having severe financial difficulties,
needs additional regulatory capital or is   In contrast, the contractual cash flows
`failing'.                                  would not be solely payments of
                                            principal and interest on the principal
                                            amount outstanding if the contractual
                                            terms of the financial instrument
                                            permit or require the issuer or another
                                            entity to impose losses on the holder
                                            (eg by writing down the par amount or
                                            by converting the instrument into a
                                                     fixed number of the issuer's ordinary
                                                     shares) as long as those contractual
                                                     terms are genuine, even if the
                                                     probability is remote that such a loss
                                                     will be imposed.




B4.1.14 The following examples illustrate contractual cash flows that are not solely
        payments of principal and interest on the principal amount outstanding. This list
        of examples is not exhaustive.

         Instrument F                                Analysis
                                                     The holder would analyse            the
         Instrument F is a bond that is              convertible bond in its entirety.
         convertible into a fixed number of
         equity instruments of the issuer.           The contractual cash flows are not
                                                     payments of principal and interest on
                                                     the principal amount outstanding
                                                     because they reflect a return that is
                                                     inconsistent with a basic lending
                                                     arrangement (see paragraph B4.1.7A);
                                                     ie the return is linked to the value of
                                                     the equity of the issuer.
         Instrument G                                Analysis

         Instrument G is a loan that pays an         The contractual cash flows are not
         inverse floating interest rate (ie the      solely payments of principal and
         interest rate has an inverse relationship   interest on the principal amount
         to market interest rates).                  outstanding.

                                                     The interest amounts are not
                                                     consideration for the time value of
                                                     money on the principal amount
                                                     outstanding.
         Instrument H                                Analysis

         Instrument H is a perpetual instrument      The contractual cash flows are not
         but the issuer may call the instrument      payments of principal and interest on
         at any point and pay the holder the par     the principal amount outstanding. That
         amount plus accrued interest due.           is because the issuer may be required to
                                                     defer interest payments and additional
         Instrument H pays a market interest         interest does not accrue on those
         rate but payment of interest cannot be      deferred interest amounts. As a result,
         made unless the issuer is able to           interest amounts are not consideration
         remain      solvent       immediately       for the time value of money on the
         afterwards.                                 principal amount outstanding.

         Deferred interest does not accrue           If interest accrued on the deferred
         additional interest.                     amounts, the contractual cash flows
                                                  could be payments of principal and
                                                  interest on the principal amount
                                                  outstanding.

                                                  The fact that Instrument H is perpetual
                                                  does not in itself mean that the
                                                  contractual cash flows are not
                                                  payments of principal and interest on
                                                  the principal amount outstanding. In
                                                  effect, a perpetual instrument has
                                                  continuous      (multiple)    extension
                                                  options. Such options may result in
                                                  contractual cash flows that are
                                                  payments of principal and interest on
                                                  the principal amount outstanding if
                                                  interest payments are mandatory and
                                                  must be paid in perpetuity.

                                                  Also, the fact that Instrument H is
                                                  callable does not mean that the
                                                  contractual cash flows are not
                                                  payments of principal and interest on
                                                  the principal amount outstanding
                                                  unless it is callable at an amount that
                                                  does not substantially reflect payment
                                                  of outstanding principal and interest on
                                                  that principal amount outstanding.
                                                  Even if the callable amount includes an
                                                  amount that reasonably compensates
                                                  the holder for the early termination of
                                                  the instrument, the contractual cash
                                                  flows could be payments of principal
                                                  and interest on the principal amount
                                                  outstanding. (See also Paragraph
                                                  B4.1.12.)




B4.1.15 In some cases a financial asset may have contractual cash flows that are described
        as principal and interest but those cash flows do not represent the payment of
        principal and interest on the principal amount outstanding as described in
        paragraphs 4.1.2(b), 4.1.2A(b) and 4.1.3 of this Standard.

B4.1.16 This may be the case if the financial asset represents an investment in particular
        assets or cash flows and hence the contractual cash flows are not solely payments
        of principal and interest on the principal amount outstanding. For example, if the
        contractual terms stipulate that the financial asset's cash flows increase as more
        automobiles use a particular toll road, those contractual cash flows are
        inconsistent with a basic lending arrangement. As a result, the instrument would
        not satisfy the condition in paragraphs 4.1.2(b) and 4.1.2A(b). This could be the
        case when a creditor's claim is limited to specified assets of the debtor or the cash
        flows from specified assets (for example, a `non-recourse' financial asset).

B4.1.17 However, the fact that a financial asset is non-recourse does not in itself
        necessarily preclude the financial asset from meeting the condition in paragraphs
        4.1.2(b) and 4.1.2A(b). In such situations, the creditor is required to assess (`look
        through to') the particular underlying assets or cash flows to determine whether
        the contractual cash flows of the financial asset being classified are payments of
        principal and interest on the principal amount outstanding. If the terms of the
        financial asset give rise to any other cash flows or limit the cash flows in a manner
        inconsistent with payments representing principal and interest, the financial asset
        does not meet the condition in paragraphs 4.1.2(b) and 4.1.2A(b). Whether the
        underlying assets are financial assets or non-financial assets does not in itself
        affect this assessment.

B4.1.18 A contractual cash flow characteristic does not affect the classification of the
        financial asset if it could have only a de minimis effect on the contractual cash
        flows of the financial asset. To make this determination, an entity must consider
        the possible effect of the contractual cash flow characteristic in each reporting
        period and cumulatively over the life of the financial instrument. In addition, if a
        contractual cash flow characteristic could have an effect on the contractual cash
        flows that is more than de minimis (either in a single reporting period or
        cumulatively) but that cash flow characteristic is not genuine, it does not affect the
        classification of a financial asset. A cash flow characteristic is not genuine if it
        affects the instrument's contractual cash flows only on the occurrence of an event
        that is extremely rare, highly abnormal and very unlikely to occur.

B4.1.19 In almost every lending transaction the creditor's instrument is ranked relative to
        the instruments of the debtor's other creditors. An instrument that is subordinated
        to other instruments may have contractual cash flows that are payments of
        principal and interest on the principal amount outstanding if the debtor's non-
        payment is a breach of contract and the holder has a contractual right to unpaid
        amounts of principal and interest on the principal amount outstanding even in the
        event of the debtor's bankruptcy. For example, a trade receivable that ranks its
        creditor as a general creditor would qualify as having payments of principal and
        interest on the principal amount outstanding. This is the case even if the debtor
        issued loans that are collateralised, which in the event of bankruptcy would give
        that loan holder priority over the claims of the general creditor in respect of the
        collateral but does not affect the contractual right of the general creditor to unpaid
        principal and other amounts due.
        Contractually linked instruments

B4.1.20 In some types of transactions, an issuer may prioritise payments to the holders of
        financial assets using multiple contractually linked instruments that create
        concentrations of credit risk (tranches). Each tranche has a subordination ranking
        that specifies the order in which any cash flows generated by the issuer are
        allocated to the tranche. In such situations, the holders of a tranche have the right
        to payments of principal and interest on the principal amount outstanding only if
        the issuer generates sufficient cash flows to satisfy higher-ranking tranches.

B4.1.21 In such transactions, a tranche has cash flow characteristics that are payments of
        principal and interest on the principal amount outstanding only if:

        (a)     the contractual terms of the tranche being assessed for classification
                (without looking through to the underlying pool of financial instruments)
                give rise to cash flows that are solely payments of principal and interest on
                the principal amount outstanding (eg the interest rate on the tranche is not
                linked to a commodity index);

        (b)     the underlying pool of financial instruments has the cash flow
                characteristics set out in paragraphs B4.1.23 and B4.1.24; and

        (c)     the exposure to credit risk in the underlying pool of financial instruments
                inherent in the tranche is equal to or lower than the exposure to credit risk
                of the underlying pool of financial instruments (for example, the credit
                rating of the tranche being assessed for classification is equal to or higher
                than the credit rating that would apply to a single tranche that funded the
                underlying pool of financial instruments).

B4.1.22 An entity must look through until it can identify the underlying pool of
        instruments that are creating (instead of passing through) the cash flows. This is
        the underlying pool of financial instruments.

B4.1.23 The underlying pool must contain one or more instruments that have contractual
        cash flows that are solely payments of principal and interest on the principal
        amount outstanding.

B4.1.24 The underlying pool of instruments may also include instruments that:

          (a)   reduce the cash flow variability of the instruments in paragraph B4.1.23
                and, when combined with the instruments in paragraph B4.1.23, result in
                cash flows that are solely payments of principal and interest on the
                principal amount outstanding (eg an interest rate cap or floor or a contract
                that reduces the credit risk on some or all of the instruments in paragraph
                B4.1.23); or

          (b)   align the cash flows of the tranches with the cash flows of the pool of
                underlying instruments in paragraph B4.1.23 to address differences in and
                only in:

                (i)     whether the interest rate is fixed or floating;

                (ii)    the currency in which the cash flows are denominated, including
                        inflation in that currency; or

                (iii)   the timing of the cash flows.

B4.1.25 If any instrument in the pool does not meet the conditions in either paragraph
        B4.1.23 or paragraph B4.1.24, the condition in paragraph B4.1.21(b) is not met. In
        performing this assessment, a detailed instrument-by-instrument analysis of the
        pool may not be necessary. However, an entity must use judgement and perform
        sufficient analysis to determine whether the instruments in the pool meet the
        conditions in paragraphs B4.1.23­B4.1.24. (See also paragraph B4.1.18 for
        guidance on contractual cash flow characteristics that have only a de minimis
        effect.)

B4.1.26 If the holder cannot assess the conditions in paragraph B4.1.21 at initial
        recognition, the tranche must be measured at fair value through profit or loss. If
        the underlying pool of instruments can change after initial recognition in such a
        way that the pool may not meet the conditions in paragraphs B4.1.23­B4.1.24, the
        tranche does not meet the conditions in paragraph B4.1.21 and must be measured
        at fair value through profit or loss. However, if the underlying pool includes
        instruments that are collateralised by assets that do not meet the conditions in
        paragraphs B4.1.23­B4.1.24, the ability to take possession of such assets shall be
        disregarded for the purposes of applying this paragraph unless the entity acquired
        the tranche with the intention of controlling the collateral.

        Option to designate a financial asset or financial liability as at fair value
        through profit or loss (Sections 4.1
        and 4.2)

B4.1.27 Subject to the conditions in paragraphs 4.1.5 and 4.2.2, this Standard allows an
        entity to designate a financial asset, a financial liability, or a group of financial
        instruments (financial assets, financial liabilities or both) as at fair value through
        profit or loss provided that doing so results in more relevant information.

B4.1.28 The decision of an entity to designate a financial asset or financial liability as at
         fair value through profit or loss is similar to an accounting policy choice
         (although, unlike an accounting policy choice, it is not required to be applied
         consistently to all similar transactions). When an entity has such a choice,
         paragraph 14(b) of Ind AS 8 requires the chosen policy to result in the financial
         statements providing reliable and more relevant information about the effects of
         transactions, other events and conditions on the entity's financial position,
         financial performance or cash flows. For example, in the case of designation of a
         financial liability as at fair value through profit or loss, paragraph 4.2.2 sets out
         the two circumstances when the requirement for more relevant information will be
         met. Accordingly, to choose such designation in accordance with paragraph 4.2.2,
         the entity needs to demonstrate that it falls within one (or both) of these two
         circumstances.

         Designation eliminates or significantly reduces an accounting mismatch

B4.1.29 Measurement of a financial asset or financial liability and classification of
        recognised changes in its value are determined by the item's classification and
        whether the item is part of a designated hedging relationship. Those requirements
        can create a measurement or recognition inconsistency (sometimes referred to as
        an `accounting mismatch') when, for example, in the absence of designation as at
        fair value through profit or loss, a financial asset would be classified as
        subsequently measured at fair value through profit or loss and a liability the entity
        considers related would be subsequently measured at amortised cost (with
        changes in fair value not recognised). In such circumstances, an entity may
        conclude that its financial statements would provide more relevant information if
        both the asset and the liability were measured as at fair value through profit or
        loss.

B4.1.30 The following examples show when this condition could be met. In all cases, an
        entity may use this condition to designate financial assets or financial liabilities as
        at fair value through profit or loss only if it meets the principle in paragraph 4.1.5
        or 4.2.2(a):

         (a)   an entity has liabilities under insurance contracts whose measurement
               incorporates current information (as permitted by paragraph 24 of Ind AS
               104) and financial assets that it considers to be related and that would
               otherwise be measured at either fair value through other comprehensive
               income or amortised cost.

         (b)   an entity has financial assets, financial liabilities or both that share a risk,
               such as interest rate risk, and that gives rise to opposite changes in fair value
               that tend to offset each other. However, only some of the instruments would
               be measured at fair value through profit or loss (for example, those that are
               derivatives, or are classified as held for trading). It may also be the case that
               the requirements for hedge accounting are not met because, for example, the
               requirements for hedge effectiveness in paragraph 6.4.1 are not met.

         (c)   an entity has financial assets, financial liabilities or both that share a risk,
               such as interest rate risk, that gives rise to opposite changes in fair value that
               tend to offset each other and none of the financial assets or financial
               liabilities qualifies for designation as a hedging instrument because they are
               not measured at fair value through profit or loss. Furthermore, in the
               absence of hedge accounting there is a significant inconsistency in the
               recognition of gains and losses. For example, the entity has financed a
               specified group of loans by issuing traded bonds whose changes in fair value
               tend to offset each other. If, in addition, the entity regularly buys and sells
               the bonds but rarely, if ever, buys and sells the loans, reporting both the
               loans and the bonds at fair value through profit or loss eliminates the
               inconsistency in the timing of the recognition of the gains and losses that
               would otherwise result from measuring them both at amortised cost and
               recognising a gain or loss each time a bond is repurchased.

B4.1.31 In cases such as those described in the preceding paragraph, to designate, at initial
        recognition, the financial assets and financial liabilities not otherwise so measured
        as at fair value through profit or loss may eliminate or significantly reduce the
        measurement or recognition inconsistency and produce more relevant information.
        For practical purposes, the entity need not enter into all of the assets and liabilities
        giving rise to the measurement or recognition inconsistency at exactly the same
        time. A reasonable delay is permitted provided that each transaction is designated
        as at fair value through profit or loss at its initial recognition and, at that time, any
        remaining transactions are expected to occur.

B4.1.32 It would not be acceptable to designate only some of the financial assets and
        financial liabilities giving rise to the inconsistency as at fair value through profit
        or loss if to do so would not eliminate or significantly reduce the inconsistency
        and would therefore not result in more relevant information. However, it would be
        acceptable to designate only some of a number of similar financial assets or
        similar financial liabilities if doing so achieves a significant reduction (and
        possibly a greater reduction than other allowable designations) in the
        inconsistency. For example, assume an entity has a number of similar financial
        liabilities that sum to Rs.100 and a number of similar financial assets that sum to
        Rs.50 but are measured on a different basis. The entity may significantly reduce
        the measurement inconsistency by designating at initial recognition all of the
        assets but only some of the liabilities (for example, individual liabilities with a
        combined total of Rs.45) as at fair value through profit or loss. However, because
        designation as at fair value through profit or loss can be applied only to the whole
        of a financial instrument, the entity in this example must designate one or more
        liabilities in their entirety. It could not designate either a component of a liability
         (eg changes in value attributable to only one risk, such as changes in a benchmark
         interest rate) or a proportion (ie percentage) of a liability.




         A group of financial liabilities or financial assets and financial liabilities is
         managed and its performance is evaluated on a fair value basis

B4.1.33 An entity may manage and evaluate the performance of a group of financial
        liabilities or financial assets and financial liabilities in such a way that measuring
        that group at fair value through profit or loss results in more relevant information.
        The focus in this instance is on the way the entity manages and evaluates
        performance, instead of on the nature of its financial instruments.

B4.1.34 For example, an entity may use this condition to designate financial liabilities as at
        fair value through profit or loss if it meets the principle in paragraph 4.2.2(b) and
        the entity has financial assets and financial liabilities that share one or more risks
        and those risks are managed and evaluated on a fair value basis in accordance
        with a documented policy of asset and liability management. An example could be
        an entity that has issued `structured products' containing multiple embedded
        derivatives and manages the resulting risks on a fair value basis using a mix of
        derivative and non-derivative financial instruments.

B4.1.35 As noted above, this condition relies on the way the entity manages and evaluates
        performance of the group of financial instruments under consideration.
        Accordingly, (subject to the requirement of designation at initial recognition) an
        entity that designates financial liabilities as at fair value through profit or loss on
        the basis of this condition shall so designate all eligible financial liabilities that are
        managed and evaluated together.

B4.1.36 Documentation of the entity's strategy need not be extensive but should be
        sufficient to demonstrate compliance with paragraph 4.2.2(b). Such
        documentation is not required for each individual item, but may be on a portfolio
        basis. For example, if the performance management system for a department--as
        approved by the entity's key management personnel--clearly demonstrates that its
        performance is evaluated on this basis, no further documentation is required to
        demonstrate compliance with paragraph 4.2.2(b).

         Embedded derivatives (Section 4.3)

B4.3.1 When an entity becomes a party to a hybrid contract with a host that is not an asset
        within the scope of this Standard, paragraph 4.3.3 requires the entity to identify
        any embedded derivative, assess whether it is required to be separated from the
         host contract and, for those that are required to be separated, measure the
         derivatives at fair value at initial recognition and subsequently at fair value
         through profit or loss.

B4.3.2 If a host contract has no stated or predetermined maturity and represents a residual
       interest in the net assets of an entity, then its economic characteristics and risks
       are those of an equity instrument, and an embedded derivative would need to
       possess equity characteristics related to the same entity to be regarded as closely
       related. If the host contract is not an equity instrument and meets the definition of
       a financial instrument, then its economic characteristics and risks are those of a
       debt instrument.

B4.3.3 An embedded non-option derivative (such as an embedded forward or swap) is
        separated from its host contract on the basis of its stated or implied substantive
        terms, so as to result in it having a fair value of zero at initial recognition. An
        embedded option-based derivative (such as an embedded put, call, cap, floor or
        swaption) is separated from its host contract on the basis of the stated terms of the
        option feature. The initial carrying amount of the host instrument is the residual
        amount after separating the embedded derivative.

B4.3.4 Generally, multiple embedded derivatives in a single hybrid contract are treated as a
        single compound embedded derivative. However, embedded derivatives that are
        classified as equity (see Ind AS 32) are accounted for separately from those
        classified as assets or liabilities. In addition, if a hybrid contract has more than one
        embedded derivative and those derivatives relate to different risk exposures and
        are readily separable and independent of each other, they are accounted for
        separately from each other.

B4.3.5 The economic characteristics and risks of an embedded derivative are not closely
        related to the host contract (paragraph 4.3.3(a)) in the following examples. In
        these examples, assuming the conditions in paragraph 4.3.3(b) and (c) are met, an
        entity accounts for the embedded derivative separately from the host contract.

         (a)   A put option embedded in an instrument that enables the holder to require
               the issuer to reacquire the instrument for an amount of cash or other assets
               that varies on the basis of the change in an equity or commodity price or
               index is not closely related to a host debt instrument.

         (b)   An option or automatic provision to extend the remaining term to maturity
               of a debt instrument is not closely related to the host debt instrument unless
               there is a concurrent adjustment to the approximate current market rate of
               interest at the time of the extension. If an entity issues a debt instrument and
               the holder of that debt instrument writes a call option on the debt instrument
               to a third party, the issuer regards the call option as extending the term to
      maturity of the debt instrument provided the issuer can be required to
      participate in or facilitate the remarketing of the debt instrument as a result
      of the call option being exercised.

(c)   Equity-indexed interest or principal payments embedded in a host debt
      instrument or insurance contract--by which the amount of interest or
      principal is indexed to the value of equity instruments--are not closely
      related to the host instrument because the risks inherent in the host and the
      embedded derivative are dissimilar.

(d)   Commodity-indexed interest or principal payments embedded in a host debt
      instrument or insurance contract--by which the amount of interest or
      principal is indexed to the price of a commodity (such as gold)--are not
      closely related to the host instrument because the risks inherent in the host
      and the embedded derivative are dissimilar.

(e)   A call, put, or prepayment option embedded in a host debt contract or host
      insurance contract is not closely related to the host contract unless:

      (i)    the option's exercise price is approximately equal on each exercise
             date to the amortised cost of the host debt instrument or the carrying
             amount of the host insurance contract; or

      (ii)   the exercise price of a prepayment option reimburses the lender for an
             amount up to the approximate present value of lost interest for the
             remaining term of the host contract. Lost interest is the product of the
             principal amount prepaid multiplied by the interest rate differential.
             The interest rate differential is the excess of the effective interest rate
             of the host contract over the effective interest rate the entity would
             receive at the prepayment date if it reinvested the principal amount
             prepaid in a similar contract for the remaining term of the host
             contract.

      The assessment of whether the call or put option is closely related to the
      host debt contract is made before separating the equity element of a
      convertible debt instrument in accordance with Ind AS 32.

(f)   Credit derivatives that are embedded in a host debt instrument and allow
      one party (the `beneficiary') to transfer the credit risk of a particular
      reference asset, which it may not own, to another party (the `guarantor') are
      not closely related to the host debt instrument. Such credit derivatives allow
      the guarantor to assume the credit risk associated with the reference asset
      without directly owning it.
B4.3.6 An example of a hybrid contract is a financial instrument that gives the holder a
        right to put the financial instrument back to the issuer in exchange for an amount
        of cash or other financial assets that varies on the basis of the change in an equity
        or commodity index that may increase or decrease (a `puttable instrument').
        Unless the issuer on initial recognition designates the puttable instrument as a
        financial liability at fair value through profit or loss, it is required to separate an
        embedded derivative (ie the indexed principal payment) under paragraph 4.3.3
        because the host contract is a debt instrument under paragraph B4.3.2 and the
        indexed principal payment is not closely related to a host debt instrument under
        paragraph B4.3.5(a). Because the principal payment can increase and decrease,
        the embedded derivative is a non-option derivative whose value is indexed to the
        underlying variable.

B4.3.7 In the case of a puttable instrument that can be put back at any time for cash equal
         to a proportionate share of the net asset value of an entity (such as units of an
         open-ended mutual fund or some unit-linked investment products), the effect of
         separating an embedded derivative and accounting for each component is to
         measure the hybrid contract at the redemption amount that is payable at the end of
         the reporting period if the holder exercised its right to put the instrument back to
         the issuer.

B4.3.8 The economic characteristics and risks of an embedded derivative are closely
        related to the economic characteristics and risks of the host contract in the
        following examples. In these examples, an entity does not account for the
        embedded derivative separately from the host contract.

         (a)   An embedded derivative in which the underlying is an interest rate or
               interest rate index that can change the amount of interest that would
               otherwise be paid or received on an interest-bearing host debt contract or
               insurance contract is closely related to the host contract unless the hybrid
               contract can be settled in such a way that the holder would not recover
               substantially all of its recognised investment or the embedded derivative
               could at least double the holder's initial rate of return on the host contract
               and could result in a rate of return that is at least twice what the market
               return would be for a contract with the same terms as the host contract.

         (b)   An embedded floor or cap on the interest rate on a debt contract or insurance
               contract is closely related to the host contract, provided the cap is at or
               above the market rate of interest and the floor is at or below the market rate
               of interest when the contract is issued, and the cap or floor is not leveraged
               in relation to the host contract. Similarly, provisions included in a contract
               to purchase or sell an asset (eg a commodity) that establish a cap and a floor
               on the price to be paid or received for the asset are closely related to the host
               contract if both the cap and floor were out of the money at inception and are
      not leveraged.

(c)   An embedded foreign currency derivative that provides a stream of principal
      or interest payments that are denominated in a foreign currency and is
      embedded in a host debt instrument (for example, a dual currency bond) is
      closely related to the host debt instrument. Such a derivative is not separated
      from the host instrument because Ind AS 21 The Effects of Changes in
      Foreign Exchange Rates requires foreign currency gains and losses on
      monetary items to be recognised in profit or loss.

(d)   An embedded foreign currency derivative in a host contract that is an
      insurance contract or not a financial instrument (such as a contract for the
      purchase or sale of a non-financial item where the price is denominated in a
      foreign currency) is closely related to the host contract provided it is not
      leveraged, does not contain an option feature, and requires payments
      denominated in one of the following currencies:

      (i)    the functional currency of any substantial party to that contract;

      (ii)   the currency in which the price of the related good or service that is
             acquired or delivered is routinely denominated in commercial
             transactions around the world (such as the US dollar for crude oil
             transactions); or

      (iii) a currency that is commonly used in contracts to purchase or sell non-
            financial items in the economic environment in which the transaction
            takes place (eg a relatively stable and liquid currency that is
            commonly used in local business transactions or external trade).

(e)   An embedded prepayment option in an interest-only or principal-only strip
      is closely related to the host contract provided the host contract

      (i)      initially resulted from separating the right to receive contractual
      cash flows of a financial instrument that, in and of itself, did not contain an
      embedded derivative, and (ii) does not contain any terms not present in the
      original host debt contract.

(f)   An embedded derivative in a host lease contract is closely related to the host
      contract if the embedded derivative is (i) an inflation-related index such as
      an index of lease payments to a consumer price index (provided that the
      lease is not leveraged and the index relates to inflation in the entity's own
      economic environment), (ii) contingent rentals based on related sales or (iii)
      contingent rentals based on variable interest rates.
        (g)    A unit-linking feature embedded in a host financial instrument or host
               insurance contract is closely related to the host instrument or host contract if
               the unit-denominated payments are measured at current unit values that
               reflect the fair values of the assets of the fund. A unit-linking feature is a
               contractual term that requires payments denominated in units of an internal
               or external investment fund.

        (h)    A derivative embedded in an insurance contract is closely related to the host
               insurance contract if the embedded derivative and host insurance contract
               are so interdependent that an entity cannot measure the embedded derivative
               separately (ie without considering the host contract).

        Instruments containing embedded derivatives

B4.3.9 As noted in paragraph B4.3.1, when an entity becomes a party to a hybrid contract
       with a host that is not an asset within the scope of this Standard and with one or
       more embedded derivatives, paragraph 4.3.3 requires the entity to identify any
       such embedded derivative, assess whether it is required to be separated from the
       host contract and, for those that are required to be separated, measure the
       derivatives at fair value at initial recognition and subsequently. These
       requirements can be more complex, or result in less reliable measures, than
       measuring the entire instrument at fair value through profit or loss. For that reason
       this Standard permits the entire hybrid contract to be designated as at fair value
       through profit or loss.

B4.3.10 Such designation may be used whether paragraph 4.3.3 requires the embedded
        derivatives to be separated from the host contract or prohibits such separation.
        However, paragraph 4.3.5 would not justify designating the hybrid contract as at
        fair value through profit or loss in the cases set out in paragraph 4.3.5(a) and (b)
        because doing so would not reduce complexity or increase reliability.

        Reassessment of embedded derivatives

B4.3.11 In accordance with paragraph 4.3.3, an entity shall assess whether an embedded
        derivative is required to be separated from the host contract and accounted for as a
        derivative when the entity first becomes a party to the contract. Subsequent
        reassessment is prohibited unless there is a change in the terms of the contract that
        significantly modifies the cash flows that otherwise would be required under the
        contract, in which case reassessment is required. An entity determines whether a
        modification to cash flows is significant by considering the extent to which the
        expected future cash flows associated with the embedded derivative, the host
        contract or both have changed and whether the change is significant relative to the
        previously expected cash flows on the contract.
B4.3.12 Paragraph B4.3.11 does not apply to embedded derivatives in contracts acquired
        in:

        (a)        a business combination (as defined in Ind AS 103 Business Combinations);

        (b)        a combination of entities or businesses under common control as described
                   in paragraphs B1­B4 of Ind AS 103; or

        (c)        the formation of a joint venture as defined in Ind AS 111 Joint
                   Arrangements or their possible reassessment at the date of acquisition.3

        Reclassification of financial assets (Section 4.4)

        Reclassification of financial assets

B4.4.1 Paragraph 4.4.1 requires an entity to reclassify financial assets if the entity
       changes its business model for managing those financial assets. Such changes are
       expected to be very infrequent. Such changes are determined by the entity's senior
       management as a result of external or internal changes and must be significant to
       the entity's operations and demonstrable to external parties. Accordingly, a
       change in an entity's business model will occur only when an entity either begins
       or ceases to perform an activity that is significant to its operations; for example,
       when the entity has acquired, disposed of or terminated a business line. Examples
       of a change in business model include the following:

        (a)           An entity has a portfolio of commercial loans that it holds to sell in the
                      short term. The entity acquires a company that manages commercial loans
                      and has a business model that holds the loans in order to collect the
                      contractual cash flows. The portfolio of commercial loans is no longer for
                      sale, and the portfolio is now managed together with the acquired
                      commercial loans and all are held to collect the contractual cash flows.

        (b)           A financial services firm decides to shut down its retail mortgage business.
                      That business no longer accepts new business and the financial services
                      firm is actively marketing its mortgage loan portfolio for sale.

B4.4.2 A change in the objective of the entity's business model must be effected before
       the reclassification date. For example, if a financial services firm decides on 15
       February to shut down its retail mortgage business and hence must reclassify all
       affected financial assets on 1 April (ie the first day of the entity's next reporting
       period), the entity must not accept new retail mortgage business or otherwise
                                                                    
        3
          Ind AS 103 addresses the acquisition of contracts with embedded derivatives in a business
        combination. 
        engage in activities consistent with its former business model after 15 February.

B4.4.3 The following are not changes in business model:

        (a)   a change in intention related to particular financial assets (even in
              circumstances of significant changes in market conditions).

        (b)   the temporary disappearance of a particular market for financial assets.

        (c)   a transfer of financial assets between parts of the entity with different
              business models.

        Measurement (Chapter 5)

                Initial measurement (Section 5.1)

        B5.1.1 The fair value of a financial instrument at initial recognition is normally
               the transaction price (ie the fair value of the consideration given or
               received, see also paragraph B5.1.2A and Ind AS 113). However, if part
               of the consideration given or received is for something other than the
               financial instrument, an entity shall measure the fair value of the financial
               instrument. For example, the fair value of a long-term loan or receivable
               that carries no interest can be measured as the present value of all future
               cash receipts discounted using the prevailing market rate(s) of interest for
               a similar instrument (similar as to currency, term, type of interest rate and
               other factors) with a similar credit rating. Any additional amount lent is
               an expense or a reduction of income unless it qualifies for recognition as
               some other type of asset.

        B5.1.2 If an entity originates a loan that bears an off-market interest rate (eg 5
               per cent when the market rate for similar loans is 8 per cent), and receives
               an upfront fee as compensation, the entity recognises the loan at its fair
               value, ie net of the fee it receives.

        B5.1.2AThe best evidence of the fair value of a financial instrument at initial
               recognition is normally the transaction price (ie the fair value of the
               consideration given or received, see also Ind AS 113). If an entity
               determines that the fair value at initial recognition differs from the
               transaction price as mentioned in paragraph 5.1.1A, the entity shall
               account for that instrument at that date as follows:

                 (a)   at the measurement required by paragraph 5.1.1 if that fair value is
                       evidenced by a quoted price in an active market for an identical
                       asset or liability (ie a Level 1 input) or based on a valuation
              technique that uses only data from observable markets. An entity
              shall recognise the difference between the fair value at initial
              recognition and the transaction price as a gain or loss.

        (b)   in all other cases, at the measurement required by paragraph 5.1.1,
              adjusted to defer the difference between the fair value at initial
              recognition and the transaction price. After initial recognition, the
              entity shall recognise that deferred difference as a gain or loss only
              to the extent that it arises from a change in a factor (including time)
              that market participants would take into account when pricing the
              asset or liability.

        Subsequent measurement (Sections 5.2 and 5.3)

B5.2.1 If a financial instrument that was previously recognised as a financial
       asset is measured at fair value through profit or loss and its fair value
       decreases below zero, it is a financial liability measured in accordance
       with paragraph 4.2.1. However, hybrid contracts with hosts that are
       assets within the scope of this Standard are always measured in
       accordance with paragraph 4.3.2.

B5.2.2 The following example illustrates the accounting for transaction costs on
       the initial and subsequent measurement of a financial asset measured at
       fair value with changes through other comprehensive income in
       accordance with either paragraph 5.7.5 or 4.1.2A. An entity acquires a
       financial asset for Rs.100 plus a purchase commission of Rs.2. Initially,
       the entity recognises the asset at Rs.102. The reporting period ends one
       day later, when the quoted market price of the asset is Rs.100. If the asset
       were sold, a commission of Rs.3 would be paid. On that date, the entity
       measures the asset at Rs.100 (without regard to the possible commission
       on sale) and recognises a loss of Rs.2 in other comprehensive income. If
       the financial asset is measured at fair value through other comprehensive
       income in accordance with paragraph 4.1.2A, the transaction costs are
       amortised to profit or loss using the effective interest method.

B5.2.2A The subsequent measurement of a financial asset or financial liability and
        the subsequent recognition of gains and losses described in paragraph
        B5.1.2A shall be consistent with the requirements of this Standard.

        Investments in equity instruments and contracts on those
        investments

B5.2.3 All investments in equity instruments and contracts on those instruments
       must be measured at fair value. However, in limited circumstances, cost
                  may be an appropriate estimate of fair value. That may be the case if
                  insufficient more recent information is available to measure fair value, or
                  if there is a wide range of possible fair value measurements and cost
                  represents the best estimate of fair value within that range.


        B5.2.4 Indicators that cost might not be representative of fair value include:

        (a)    a significant change in the performance of the investee compared with
               budgets, plans or milestones.

        (b)    changes in expectation that the investee's technical product milestones will
               be achieved.

        (c)    a significant change in the market for the investee's equity or its products or
               potential products.

        (d)    a significant change in the global economy or the economic environment in
               which the investee operates.

        (e)    a significant change in the performance of comparable entities, or in the
               valuations implied by the overall market.

        (f)    internal matters of the investee such as fraud, commercial disputes,
               litigation, changes in management or strategy.

        (g)    evidence from external transactions in the investee's equity, either by the
               investee (such as a fresh issue of equity), or by transfers of equity
               instruments between third parties.

B5.2.5 The list in paragraph B5.2.4 is not exhaustive. An entity shall use all information
        about the performance and operations of the investee that becomes available after
        the date of initial recognition. To the extent that any such relevant factors exist,
        they may indicate that cost might not be representative of fair value. In such cases,
        the entity must measure fair value.

B5.2.6 Cost is never the best estimate of fair value for investments in quoted equity
        instruments (or contracts on quoted equity instruments).

        Amortised cost measurement (Section 5.4)

        Effective interest method

B5.4.1 In applying the effective interest method, an entity identifies fees that are an
        integral part of the effective interest rate of a financial instrument. The description
        of fees for financial services may not be indicative of the nature and substance of
        the services provided. Fees that are an integral part of the effective interest rate of
        a financial instrument are treated as an adjustment to the effective interest rate,
        unless the financial instrument is measured at fair value, with the change in fair
        value being recognised in profit or loss. In those cases, the fees are recognised as
        revenue or expense when the instrument is initially recognised.

B5.4.2 Fees that are an integral part of the effective interest rate of a financial instrument
        include:

         (a)   origination fees received by the entity relating to the creation or acquisition
               of a financial asset. Such fees may include compensation for activities such
               as evaluating the borrower's financial condition, evaluating and recording
               guarantees, collateral and other security arrangements, negotiating the terms
               of the instrument, preparing and processing documents and closing the
               transaction. These fees are an integral part of generating an involvement
               with the resulting financial instrument.

        (b)    commitment fees received by the entity to originate a loan when the loan
               commitment is not measured in accordance with paragraph 4.2.1(a) and it is
               probable that the entity will enter into a specific lending arrangement. These
               fees are regarded as compensation for an ongoing involvement with the
               acquisition of a financial instrument. If the commitment expires without the
               entity making the loan, the fee is recognised as revenue on expiry.

        (c)    origination fees paid on issuing financial liabilities measured at amortised
               cost. These fees are an integral part of generating an involvement with a
               financial liability. An entity distinguishes fees and costs that are an integral
               part of the effective interest rate for the financial liability from origination
               fees and transaction costs relating to the right to provide services, such as
               investment management services.

B5.4.3 Fees that are not an integral part of the effective interest rate of a financial
        instrument and are accounted for in accordance with Ind AS 115 include:

        (a)    fees charged for servicing a loan;

        (b)    commitment fees to originate a loan when the loan commitment is not
               measured in accordance with paragraph 4.2.1(a) and it is unlikely that a
               specific lending arrangement will be entered into; and

        (c)    loan syndication fees received by an entity that arranges a loan and retains
               no part of the loan package for itself (or retains a part at the same effective
               interest rate for comparable risk as other participants).

B5.4.4 When applying the effective interest method, an entity generally amortises any fees,
        points paid or received, transaction costs and other premiums or discounts that are
        included in the calculation of the effective interest rate over the expected life of
        the financial instrument. However, a shorter period is used if this is the period to
        which the fees, points paid or received, transaction costs, premiums or discounts
        relate. This will be the case when the variable to which the fees, points paid or
        received, transaction costs, premiums or discounts relate is repriced to market
        rates before the expected maturity of the financial instrument. In such a case, the
        appropriate amortisation period is the period to the next such repricing date. For
        example, if a premium or discount on a floating-rate financial instrument reflects
        the interest that has accrued on that financial instrument since the interest was last
        paid, or changes in the market rates since the floating interest rate was reset to the
        market rates, it will be amortised to the next date when the floating interest is reset
        to market rates. This is because the premium or discount relates to the period to
        the next interest reset date because, at that date, the variable to which the premium
        or discount relates (ie interest rates) is reset to the market rates. If, however, the
        premium or discount results from a change in the credit spread over the floating
        rate specified in the financial instrument, or other variables that are not reset to the
        market rates, it is amortised over the expected life of the financial instrument.

B5.4.5 For floating-rate financial assets and floating-rate financial liabilities, periodic re-
        estimation of cash flows to reflect the movements in the market rates of interest
        alters the effective interest rate. If a floating-rate financial asset or a floating-rate
        financial liability is recognised initially at an amount equal to the principal
        receivable or payable on maturity, re-estimating the future interest payments
        normally has no significant effect on the carrying amount of the asset or the
        liability.

B5.4.6 If an entity revises its estimates of payments or receipts (excluding modifications in
         accordance with paragraph 5.4.3 and changes in estimates of expected credit
         losses), it shall adjust the gross carrying amount of the financial asset or amortised
         cost of a financial liability (or group of financial instruments) to reflect actual and
         revised estimated contractual cash flows. The entity recalculates the gross
         carrying amount of the financial asset or amortised cost of the financial liability as
         the present value of the estimated future contractual cash flows that are discounted
         at the financial instrument's original effective interest rate (or credit-adjusted
         effective interest rate for purchased or originated credit-impaired financial assets)
         or, when applicable, the revised effective interest rate calculated in accordance
         with paragraph 6.5.10. The adjustment is recognised in profit or loss as income or
         expense.

B5.4.7 In some cases a financial asset is considered credit-impaired at initial recognition
        because the credit risk is very high, and in the case of a purchase it is acquired at a
        deep discount. An entity is required to include the initial expected credit losses in
        the estimated cash flows when calculating the credit-adjusted effective interest
        rate for financial assets that are considered to be purchased or originated credit-
        impaired at initial recognition. However, this does not mean that a credit-adjusted
        effective interest rate should be applied solely because the financial asset has high
        credit risk at initial recognition.

        Transaction costs

B5.4.8 Transaction costs include fees and commission paid to agents (including employees
        acting as selling agents), advisers, brokers and dealers, levies by regulatory
        agencies and security exchanges, and transfer taxes and duties. Transaction costs
        do not include debt premiums or discounts, financing costs or internal
        administrative or holding costs.

        Write-off

B5.4.9 Write-offs can relate to a financial asset in its entirety or to a portion of it. For
       example, an entity plans to enforce the collateral on a financial asset and expects
       to recover no more than 30 per cent of the financial asset from the collateral. If the
       entity has no reasonable prospects of recovering any further cash flows from the
       financial asset, it should write off the remaining 70 per cent of the financial asset.

        Impairment (Section 5.5)

        Collective and individual assessment basis

B5.5.1 In order to meet the objective of recognising lifetime expected credit losses for
        significant increases in credit risk since initial recognition, it may be necessary to
        perform the assessment of significant increases in credit risk on a collective basis
        by considering information that is indicative of significant increases in credit risk
        on, for example, a group or sub-group of financial instruments. This is to ensure
        that an entity meets the objective of recognising lifetime expected credit losses
        when there are significant increases in credit risk, even if evidence of such
        significant increases in credit risk at the individual instrument level is not yet
        available.

B5.5.2 Lifetime expected credit losses are generally expected to be recognised before a
        financial instrument becomes past due. Typically, credit risk increases
        significantly before a financial instrument becomes past due or other lagging
        borrower-specific factors (for example, a modification or restructuring) are
        observed. Consequently when reasonable and supportable information that is
        more forward-looking than past due information is available without undue cost
         or effort, it must be used to assess changes in credit risk.

B5.5.3 However, depending on the nature of the financial instruments and the credit risk
        information available for particular groups of financial instruments, an entity may
        not be able to identify significant changes in credit risk for individual financial
        instruments before the financial instrument becomes past due. This may be the
        case for financial instruments such as retail loans for which there is little or no
        updated credit risk information that is routinely obtained and monitored on an
        individual instrument until a customer breaches the contractual terms. If changes
        in the credit risk for individual financial instruments are not captured before they
        become past due, a loss allowance based only on credit information at an
        individual financial instrument level would not faithfully represent the changes in
        credit risk since initial recognition.

B5.5.4 In some circumstances an entity does not have reasonable and supportable
        information that is available without undue cost or effort to measure lifetime
        expected credit losses on an individual instrument basis. In that case, lifetime
        expected credit losses shall be recognised on a collective basis that considers
        comprehensive credit risk information. This comprehensive credit risk
        information must incorporate not only past due information but also all relevant
        credit information, including forward-looking macroeconomic information, in
        order to approximate the result of recognising lifetime expected credit losses when
        there has been a significant increase in credit risk since initial recognition on an
        individual instrument level.




B5.5.5 For the purpose of determining significant increases in credit risk and recognising a
        loss allowance on a collective basis, an entity can group financial instruments on
        the basis of shared credit risk characteristics with the objective of facilitating an
        analysis that is designed to enable significant increases in credit risk to be
        identified on a timely basis. The entity should not obscure this information by
        grouping financial instruments with different risk characteristics. Examples of
        shared credit risk characteristics may include, but are not limited to, the:

         (a)   instrument type;

         (b)   credit risk ratings;

         (c)   collateral type;

         (d)   date of initial recognition;

         (e)   remaining term to maturity;

         (f)   industry;
         (g)   geographical location of the borrower; and

         (h)   the value of collateral relative to the financial asset if it has an impact on the
               probability of a default occurring (for example, non-recourse loans in some
               jurisdictions or loan-to-value ratios).

B5.5.6 Paragraph 5.5.4 requires that lifetime expected credit losses are recognised on all
        financial instruments for which there has been significant increases in credit risk
        since initial recognition. In order to meet this objective, if an entity is not able to
        group financial instruments for which the credit risk is considered to have
        increased significantly since initial recognition based on shared credit risk
        characteristics, the entity should recognise lifetime expected credit losses on a
        portion of the financial assets for which credit risk is deemed to have increased
        significantly. The aggregation of financial instruments to assess whether there are
        changes in credit risk on a collective basis may change over time as new
        information becomes available on groups of, or individual, financial instruments.

         Timing of recognising lifetime expected credit losses

B5.5.7 The assessment of whether lifetime expected credit losses should be recognised is
        based on significant increases in the likelihood or risk of a default occurring since
        initial recognition (irrespective of whether a financial instrument has been
        repriced to reflect an increase in credit risk) instead of on evidence of a financial
        asset being credit-impaired at the reporting date or an actual default occurring.
        Generally, there will be a significant increase in credit risk before a financial asset
        becomes credit-impaired or an actual default occurs.

B5.5.8 For loan commitments, an entity considers changes in the risk of a default occurring
        on the loan to which a loan commitment relates. For financial guarantee contracts,
        an entity considers the changes in the risk that the specified debtor will default on
        the contract.

B5.5.9 The significance of a change in the credit risk since initial recognition depends on
        the risk of a default occurring as at initial recognition. Thus, a given change, in
        absolute terms, in the risk of a default occurring will be more significant for a
        financial instrument with a lower initial risk of a default occurring compared to a
        financial instrument with a higher initial risk of a default occurring.

B5.5.10 The risk of a default occurring on financial instruments that have comparable
        credit risk is higher the longer the expected life of the instrument; for example, the
        risk of a default occurring on an AAA-rated bond with an expected life of 10
        years is higher than that on an AAA-rated bond with an expected life of five
        years.
B5.5.11 Because of the relationship between the expected life and the risk of a default
        occurring, the change in credit risk cannot be assessed simply by comparing the
        change in the absolute risk of a default occurring over time. For example, if the
        risk of a default occurring for a financial instrument with an expected life of 10
        years at initial recognition is identical to the risk of a default occurring on that
        financial instrument when its expected life in a subsequent period is only five
        years, that may indicate an increase in credit risk. This is because the risk of a
        default occurring over the expected life usually decreases as time passes if the
        credit risk is unchanged and the financial instrument is closer to maturity.
        However, for financial instruments that only have significant payment obligations
        close to the maturity of the financial instrument the risk of a default occurring
        may not necessarily decrease as time passes. In such a case, an entity should also
        consider other qualitative factors that would demonstrate whether credit risk has
        increased significantly since initial recognition.

B5.5.12 An entity may apply various approaches when assessing whether the credit risk on
        a financial instrument has increased significantly since initial recognition or when
        measuring expected credit losses. An entity may apply different approaches for
        different financial instruments. An approach that does not include an explicit
        probability of default as an input per se, such as a credit loss rate approach, can be
        consistent with the requirements in this Standard, provided that an entity is able to
        separate the changes in the risk of a default occurring from changes in other
        drivers of expected credit losses, such as collateral, and considers the following
        when making the assessment:

         (a)   the change in the risk of a default occurring since initial recognition;

         (b)   the expected life of the financial instrument; and

         (c)   reasonable and supportable information that is available without undue cost
               or effort that may affect credit risk.

B5.5.13 The methods used to determine whether credit risk has increased significantly on a
        financial instrument since initial recognition should consider the characteristics of
        the financial instrument (or group of financial instruments) and the default
        patterns in the past for comparable financial instruments. Despite the requirement
        in paragraph 5.5.9, for financial instruments for which default patterns are not
        concentrated at a specific point during the expected life of the financial
        instrument, changes in the risk of a default occurring over the next 12 months may
        be a reasonable approximation of the changes in the lifetime risk of a default
        occurring. In such cases, an entity may use changes in the risk of a default
        occurring over the next 12 months to determine whether credit risk has increased
        significantly since initial recognition, unless circumstances indicate that a lifetime
        assessment is necessary.

B5.5.14 However, for some financial instruments, or in some circumstances, it may not be
        appropriate to use changes in the risk of a default occurring over the next 12
        months to determine whether lifetime expected credit losses should be recognised.
        For example, the change in the risk of a default occurring in the next 12 months
        may not be a suitable basis for determining whether credit risk has increased on a
        financial instrument with a maturity of more than 12 months when:

        (a)    the financial instrument only has significant payment obligations beyond the
               next 12 months;

         (b)   changes in relevant macroeconomic or other credit-related factors occur that
               are not adequately reflected in the risk of a default occurring in the next 12
               months; or

         (c)   changes in credit-related factors only have an impact on the credit risk of
               the financial instrument (or have a more pronounced effect) beyond 12
               months.

        Determining whether credit risk has increased significantly since initial
        recognition

B5.5.15 When determining whether the recognition of lifetime expected credit losses is
        required, an entity shall consider reasonable and supportable information that is
        available without undue cost or effort and that may affect the credit risk on a
        financial instrument in accordance with paragraph 5.5.17(c). An entity need not
        undertake an exhaustive search for information when determining whether credit
        risk has increased significantly since initial recognition.

B5.5.16 Credit risk analysis is a multifactor and holistic analysis; whether a specific factor
        is relevant, and its weight compared to other factors, will depend on the type of
        product, characteristics of the financial instruments and the borrower as well as
        the geographical region. An entity shall consider reasonable and supportable
        information that is available without undue cost or effort and that is relevant for
        the particular financial instrument being assessed. However, some factors or
        indicators may not be identifiable on an individual financial instrument level. In
        such a case, the factors or indicators should be assessed for appropriate portfolios,
        groups of portfolios or portions of a portfolio of financial instruments to
        determine whether the requirement in paragraph 5.5.3 for the recognition of
        lifetime expected credit losses has been met.

B5.5.17 The following non-exhaustive list of information may be relevant in assessing
        changes in credit risk:
(a)   significant changes in internal price indicators of credit risk as a result of a
      change in credit risk since inception, including, but not limited to, the credit
      spread that would result if a particular financial instrument or similar
      financial instrument with the same terms and the same counterparty were
      newly originated or issued at the reporting date.

(b)   other changes in the rates or terms of an existing financial instrument that
      would be significantly different if the instrument was newly originated or
      issued at the reporting date (such as more stringent covenants, increased
      amounts of collateral or guarantees, or higher income coverage) because of
      changes in the credit risk of the financial instrument since initial
      recognition.

(c)   significant changes in external market indicators of credit risk for a
      particular financial instrument or similar financial instruments with the
      same expected life. Changes in market indicators of credit risk include, but
      are not limited to:

      (i)    the credit spread;

      (ii)   the credit default swap prices for the borrower;

      (iii) the length of time or the extent to which the fair value of a financial
            asset has been less than its amortised cost; and

      (iv) other market information related to the borrower, such as changes in
           the price of a borrower's debt and equity instruments.

(d)   an actual or expected significant change in the financial instrument's
      external credit rating.

(e)   an actual or expected internal credit rating downgrade for the borrower or
      decrease in behavioural scoring used to assess credit risk internally. Internal
      credit ratings and internal behavioural scoring are more reliable when they
      are mapped to external ratings or supported by default studies.

(f)   existing or forecast adverse changes in business, financial or economic
      conditions that are expected to cause a significant change in the borrower's
      ability to meet its debt obligations, such as an actual or expected increase in
      interest rates or an actual or expected significant increase in unemployment
      rates.

(g)   an actual or expected significant change in the operating results of the
      borrower. Examples include actual or expected declining revenues or
      margins, increasing operating risks, working capital deficiencies, decreasing
      asset quality, increased balance sheet leverage, liquidity, management
      problems or changes in the scope of business or organisational structure
      (such as the discontinuance of a segment of the business) that results in a
      significant change in the borrower's ability to meet its debt obligations.

(h)   significant increases in credit risk on other financial instruments of the same
      borrower.

(i)   an actual or expected significant adverse change in the regulatory,
      economic, or technological environment of the borrower that results in a
      significant change in the borrower's ability to meet its debt obligations, such
      as a decline in the demand for the borrower's sales product because of a
      shift in technology.

(j)   significant changes in the value of the collateral supporting the obligation or
      in the quality of third-party guarantees or credit enhancements, which are
      expected to reduce the borrower's economic incentive to make scheduled
      contractual payments or to otherwise have an effect on the probability of a
      default occurring. For example, if the value of collateral declines because
      house prices decline, borrowers in some jurisdictions have a greater
      incentive to default on their mortgages.

(k)   a significant change in the quality of the guarantee provided by a
      shareholder (or an individual's parents) if the shareholder (or parents) have
      an incentive and financial ability to prevent default by capital or cash
      infusion.

(l)   significant changes, such as reductions in financial support from a parent
      entity or other affiliate or an actual or expected significant change in the
      quality of credit enhancement, that are expected to reduce the borrower's
      economic incentive to make scheduled contractual payments. Credit quality
      enhancements or support include the consideration of the financial condition
      of the guarantor and/or, for interests issued in securitisations, whether
      subordinated interests are expected to be capable of absorbing expected
      credit losses (for example, on the loans underlying the security).

(m) expected changes in the loan documentation including an expected breach
    of contract that may lead to covenant waivers or amendments, interest
    payment holidays, interest rate step-ups, requiring additional collateral or
    guarantees, or other changes to the contractual framework of the instrument.

(n)   significant changes in the expected performance and behaviour of the
               borrower, including changes in the payment status of borrowers in the group
               (for example, an increase in the expected number or extent of delayed
               contractual payments or significant increases in the expected number of
               credit card borrowers who are expected to approach or exceed their credit
               limit or who are expected to be paying the minimum monthly amount).

         (o)   changes in the entity's credit management approach in relation to the
               financial instrument; ie based on emerging indicators of changes in the
               credit risk of the financial instrument, the entity's credit risk management
               practice is expected to become more active or to be focused on managing
               the instrument, including the instrument becoming more closely monitored
               or controlled, or the entity specifically intervening with the borrower.

         (p)   past due information, including the rebuttable presumption as set out in
               paragraph 5.5.11.

B5.5.18 In some cases, the qualitative and non-statistical quantitative information available
        may be sufficient to determine that a financial instrument has met the criterion for
        the recognition of a loss allowance at an amount equal to lifetime expected credit
        losses. That is, the information does not need to flow through a statistical model
        or credit ratings process in order to determine whether there has been a significant
        increase in the credit risk of the financial instrument. In other cases, an entity may
        need to consider other information, including information from its statistical
        models or credit ratings processes. Alternatively, the entity may base the
        assessment on both types of information, ie qualitative factors that are not
        captured through the internal ratings process and a specific internal rating
        category at the reporting date, taking into consideration the credit risk
        characteristics at initial recognition, if both types of information are relevant.

         More than 30 days past due rebuttable presumption

B5.5.19 The rebuttable presumption in paragraph 5.5.11 is not an absolute indicator that
        lifetime expected credit losses should be recognised, but is presumed to be the
        latest point at which lifetime expected credit losses should be recognised even
        when using forward-looking information (including macroeconomic factors on a
        portfolio level).

B5.5.20 An entity can rebut this presumption. However, it can do so only when it has
        reasonable and supportable information available that demonstrates that even if
        contractual payments become more than 30 days past due, this does not represent
        a significant increase in the credit risk of a financial instrument. For example
        when non-payment was an administrative oversight, instead of resulting from
        financial difficulty of the borrower, or the entity has access to historical evidence
        that demonstrates that there is no correlation between significant increases in the
         risk of a default occurring and financial assets on which payments are more than
         30 days past due, but that evidence does identify such a correlation when
         payments are more than 60 days past due.

B5.5.21 An entity cannot align the timing of significant increases in credit risk and the
        recognition of lifetime expected credit losses to when a financial asset is regarded
        as credit-impaired or an entity's internal definition of default.

         Financial instruments that have low credit risk at the reporting date

B5.5.22 The credit risk on a financial instrument is considered low for the purposes of
        paragraph 5.5.10, if the financial instrument has a low risk of default, the
        borrower has a strong capacity to meet its contractual cash flow obligations in the
        near term and adverse changes in economic and business conditions in the longer
        term may, but will not necessarily, reduce the ability of the borrower to fulfil its
        contractual cash flow obligations. Financial instruments are not considered to
        have low credit risk when they are regarded as having a low risk of loss simply
        because of the value of collateral and the financial instrument without that
        collateral would not be considered low credit risk. Financial instruments are also
        not considered to have low credit risk simply because they have a lower risk of
        default than the entity's other financial instruments or relative to the credit risk of
        the jurisdiction within which an entity operates.

B5.5.23 To determine whether a financial instrument has low credit risk, an entity may use
        its internal credit risk ratings or other methodologies that are consistent with a
        globally understood definition of low credit risk and that consider the risks and
        the type of financial instruments that are being assessed. An external rating of
        `investment grade' is an example of a financial instrument that may be considered
        as having low credit risk. However, financial instruments are not required to be
        externally rated to be considered to have low credit risk. They should, however,
        be considered to have low credit risk from a market participant perspective taking
        into account all of the terms and conditions of the financial instrument.

B5.5.24 Lifetime expected credit losses are not recognised on a financial instrument simply
        because it was considered to have low credit risk in the previous reporting period
        and is not considered to have low credit risk at the reporting date. In such a case,
        an entity shall determine whether there has been a significant increase in credit
        risk since initial recognition and thus whether lifetime expected credit losses are
        required to be recognised in accordance with paragraph 5.5.3.

         Modifications

B5.5.25 In some circumstances, the renegotiation or modification of the contractual cash
        flows of a financial asset can lead to the derecognition of the existing financial
        asset in accordance with this Standard. When the modification of a financial asset
        results in the derecognition of the existing financial asset and the subsequent
        recognition of the modified financial asset, the modified asset is considered a
        `new' financial asset for the purposes of this Standard.

B5.5.26 Accordingly the date of the modification shall be treated as the date of initial
        recognition of that financial asset when applying the impairment requirements to
        the modified financial asset. This typically means measuring the loss allowance at
        an amount equal to 12-month expected credit losses until the requirements for the
        recognition of lifetime expected credit losses in paragraph 5.5.3 are met.
        However, in some unusual circumstances following a modification that results in
        derecognition of the original financial asset, there may be evidence that the
        modified financial asset is credit-impaired at initial recognition, and thus, the
        financial asset should be recognised as an originated credit-impaired financial
        asset. This might occur, for example, in a situation in which there was a
        substantial modification of a distressed asset that resulted in the derecognition of
        the original financial asset. In such a case, it may be possible for the modification
        to result in a new financial asset which is credit-impaired at initial recognition.

B5.5.27 If the contractual cash flows on a financial asset have been renegotiated or
        otherwise modified, but the financial asset is not derecognised, that financial asset
        is not automatically considered to have lower credit risk. An entity shall assess
        whether there has been a significant increase in credit risk since initial recognition
        on the basis of all reasonable and supportable information that is available without
        undue cost or effort. This includes historical and forward-looking information and
        an assessment of the credit risk over the expected life of the financial asset, which
        includes information about the circumstances that led to the modification.
        Evidence that the criteria for the recognition of lifetime expected credit losses are
        no longer met may include a history of up-to-date and timely payment
        performance against the modified contractual terms. Typically a customer would
        need to demonstrate consistently good payment behaviour over a period of time
        before the credit risk is considered to have decreased. For example, a history of
        missed or incomplete payments would not typically be erased by simply making
        one payment on time following a modification of the contractual terms.
         Measurement of expected credit losses

         Expected credit losses

B5.5.28 Expected credit losses are a probability-weighted estimate of credit losses (ie the
        present value of all cash shortfalls) over the expected life of the financial
        instrument. A cash shortfall is the difference between the cash flows that are due
        to an entity in accordance with the contract and the cash flows that the entity
        expects to receive. Because expected credit losses consider the amount and timing
        of payments, a credit loss arises even if the entity expects to be paid in full but
        later than when contractually due.

B5.5.29 For financial assets, a credit loss is the present value of the difference between:

                  (a)   the contractual cash flows that are due to an entity under the
                        contract; and

                  (b)   the cash flows that the entity expects to receive.

B5.5.30 For undrawn loan commitments, a credit loss is the present value of the difference
        between:

                  (a)   the contractual cash flows that are due to the entity if the holder of
                        the loan commitment draws down the loan; and

                  (b)   the cash flows that the entity expects to receive if the loan is drawn
                        down.

B5.5.31 An entity's estimate of expected credit losses on loan commitments shall be
        consistent with its expectations of drawdowns on that loan commitment, ie it shall
        consider the expected portion of the loan commitment that will be drawn down
        within 12 months of the reporting date when estimating 12-month expected credit
        losses, and the expected portion of the loan commitment that will be drawn down
        over the expected life of the loan commitment when estimating lifetime expected
        credit losses.

B5.5.32 For a financial guarantee contract, the entity is required to make payments only in
        the event of a default by the debtor in accordance with the terms of the instrument
        that is guaranteed. Accordingly, cash shortfalls are the expected payments to
        reimburse the holder for a credit loss that it incurs less any amounts that the entity
        expects to receive from the holder, the debtor or any other party. If the asset is
        fully guaranteed, the estimation of cash shortfalls for a financial guarantee
        contract would be consistent with the estimations of cash shortfalls for the asset
        subject to the guarantee.

B5.5.33 For a financial asset that is credit-impaired at the reporting date, but that is not a
        purchased or originated credit-impaired financial asset, an entity shall measure the
        expected credit losses as the difference between the asset's gross carrying amount
        and the present value of estimated future cash flows discounted at the financial
        asset's original effective interest rate. Any adjustment is recognised in profit or
        loss as an impairment gain or loss.

B5.5.34 When measuring a loss allowance for a lease receivable, the cash flows used for
        determining the expected credit losses should be consistent with the cash flows
        used in measuring the lease receivable in accordance with Ind AS 17 Leases.

B5.5.35 An entity may use practical expedients when measuring expected credit losses if
        they are consistent with the principles in paragraph 5.5.17. An example of a
        practical expedient is the calculation of the expected credit losses on trade
        receivables using a provision matrix. The entity would use its historical credit loss
        experience (adjusted as appropriate in accordance with paragraphs B5.5.51­
        B5.5.52) for trade receivables to estimate the 12-month expected credit losses or
        the lifetime expected credit losses on the financial assets as relevant. A provision
        matrix might, for example, specify fixed provision rates depending on the number
        of days that a trade receivable is past due (for example, 1 per cent if not past due,
        2 per cent if less than 30 days past due, 3 per cent if more than 30 days but less
        than 90 days past due, 20 per cent if 90­180 days past due etc). Depending on the
        diversity of its customer base, the entity would use appropriate groupings if its
        historical credit loss experience shows significantly different loss patterns for
        different customer segments. Examples of criteria that might be used to group
        assets include geographical region, product type, customer rating, collateral or
        trade credit insurance and type of customer (such as wholesale or retail).

        Definition of default

B5.5.36 Paragraph 5.5.9 requires that when determining whether the credit risk on a
        financial instrument has increased significantly, an entity shall consider the
        change in the risk of a default occurring since initial recognition.

B5.5.37 When defining default for the purposes of determining the risk of a default
        occurring, an entity shall apply a default definition that is consistent with the
        definition used for internal credit risk management purposes for the relevant
        financial instrument and consider qualitative indicators (for example, financial
        covenants) when appropriate. However, there is a rebuttable presumption that
        default does not occur later than when a financial asset is 90 days past due unless
        an entity has reasonable and supportable information to demonstrate that a more
        lagging default criterion is more appropriate. The definition of default used for
        these purposes shall be applied consistently to all financial instruments unless
        information becomes available that demonstrates that another default definition is
        more appropriate for a particular financial instrument.

        Period over which to estimate expected credit losses

B5.5.38 In accordance with paragraph 5.5.19, the maximum period over which expected
        credit losses shall be measured is the maximum contractual period over which the
        entity is exposed to credit risk. For loan commitments and financial guarantee
        contracts, this is the maximum contractual period over which an entity has a
        present contractual obligation to extend credit.

B5.5.39 However, in accordance with paragraph 5.5.20, some financial instruments
        include both a loan and an undrawn commitment component and the entity's
        contractual ability to demand repayment and cancel the undrawn commitment
        does not limit the entity's exposure to credit losses to the contractual notice
        period. For example, revolving credit facilities, such as credit cards and overdraft
        facilities, can be contractually withdrawn by the lender with as little as one day's
        notice. However, in practice lenders continue to extend credit for a longer period
        and may only withdraw the facility after the credit risk of the borrower increases,
        which could be too late to prevent some or all of the expected credit losses. These
        financial instruments generally have the following characteristics as a result of the
        nature of the financial instrument, the way in which the financial instruments are
        managed, and the nature of the available information about significant increases in
        credit risk:

        (a)    the financial instruments do not have a fixed term or repayment structure
               and usually have a short contractual cancellation period (for example, one
               day);

        (b)   the contractual ability to cancel the contract is not enforced in the normal
              day-to-day management of the financial instrument and the contract may
              only be cancelled when the entity becomes aware of an increase in credit
              risk at the facility level; and

        (c)   the financial instruments are managed on a collective basis.

B5.5.40 When determining the period over which the entity is expected to be exposed to
        credit risk, but for which expected credit losses would not be mitigated by the
        entity's normal credit risk management actions, an entity should consider factors
        such as historical information and experience about:

        (a)   the period over which the entity was exposed to credit risk on similar
              financial instruments;
         (b)   the length of time for related defaults to occur on similar financial
               instruments following a significant increase in credit risk; and

         (c)   the credit risk management actions that an entity expects to take once the
               credit risk on the financial instrument has increased, such as the reduction or
               removal of undrawn limits.

         Probability-weighted outcome

B5.5.41 The purpose of estimating expected credit losses is neither to estimate a worst-case
        scenario nor to estimate the best-case scenario. Instead, an estimate of expected
        credit losses shall always reflect the possibility that a credit loss occurs and the
        possibility that no credit loss occurs even if the most likely outcome is no credit
        loss.

B5.5.42 Paragraph 5.5.17(a) requires the estimate of expected credit losses to reflect an
        unbiased and probability-weighted amount that is determined by evaluating a
        range of possible outcomes. In practice, this may not need to be a complex
        analysis. In some cases, relatively simple modelling may be sufficient, without the
        need for a large number of detailed simulations of scenarios. For example, the
        average credit losses of a large group of financial instruments with shared risk
        characteristics may be a reasonable estimate of the probability-weighted amount.
        In other situations, the identification of scenarios that specify the amount and
        timing of the cash flows for particular outcomes and the estimated probability of
        those outcomes will probably be needed. In those situations, the expected credit
        losses shall reflect at least two outcomes in accordance with paragraph 5.5.18.

B5.5.43 For lifetime expected credit losses, an entity shall estimate the risk of a default
        occurring on the financial instrument during its expected life. 12-month expected
        credit losses are a portion of the lifetime expected credit losses and represent the
        lifetime cash shortfalls that will result if a default occurs in the 12 months after the
        reporting date (or a shorter period if the expected life of a financial instrument is
        less than 12 months), weighted by the probability of that default occurring. Thus,
        12-month expected credit losses are neither the lifetime expected credit losses that
        an entity will incur on financial instruments that it predicts will default in the next
        12 months nor the cash shortfalls that are predicted over the next 12 months.

         Time value of money

B5.5.44 Expected credit losses shall be discounted to the reporting date, not to the
        expected default or some other date, using the effective interest rate determined at
        initial recognition or an approximation thereof. If a financial instrument has a
        variable interest rate, expected credit losses shall be discounted using the current
        effective interest rate determined in accordance with paragraph B5.4.5.

B5.5.45 For purchased or originated credit-impaired financial assets, expected credit losses
        shall be discounted using the credit-adjusted effective interest rate determined at
        initial recognition.

B5.5.46 Expected credit losses on lease receivables shall be discounted using the same
        discount rate used in the measurement of the lease receivable in accordance with
        Ind AS 17.

B5.5.47 The expected credit losses on a loan commitment shall be discounted using the
        effective interest rate, or an approximation thereof, that will be applied when
        recognising the financial asset resulting from the loan commitment. This is
        because for the purpose of applying the impairment requirements, a financial asset
        that is recognised following a draw down on a loan commitment shall be treated
        as a continuation of that commitment instead of as a new financial instrument.
        The expected credit losses on the financial asset shall therefore be measured
        considering the initial credit risk of the loan commitment from the date that the
        entity became a party to the irrevocable commitment.

B5.5.48 Expected credit losses on financial guarantee contracts or on loan commitments
        for which the effective interest rate cannot be determined shall be discounted by
        applying a discount rate that reflects the current market assessment of the time
        value of money and the risks that are specific to the cash flows but only if, and to
        the extent that, the risks are taken into account by adjusting the discount rate
        instead of adjusting the cash shortfalls being discounted.

        Reasonable and supportable information

B5.5.49 For the purpose of this Standard, reasonable and supportable information is that
        which is reasonably available at the reporting date without undue cost or effort,
        including information about past events, current conditions and forecasts of future
        economic conditions. Information that is available for financial reporting purposes
        is considered to be available without undue cost or effort.

B5.5.50 An entity is not required to incorporate forecasts of future conditions over the
        entire expected life of a financial instrument. The degree of judgement that is
        required to estimate expected credit losses depends on the availability of detailed
        information. As the forecast horizon increases, the availability of detailed
        information decreases and the degree of judgement required to estimate expected
        credit losses increases. The estimate of expected credit losses does not require a
        detailed estimate for periods that are far in the future--for such periods, an entity
        may extrapolate projections from available, detailed information.
B5.5.51 An entity need not undertake an exhaustive search for information but shall
        consider all reasonable and supportable information that is available without
        undue cost or effort and that is relevant to the estimate of expected credit losses,
        including the effect of expected prepayments. The information used shall include
        factors that are specific to the borrower, general economic conditions and an
        assessment of both the current as well as the forecast direction of conditions at the
        reporting date. An entity may use various sources of data, that may be both
        internal (entity-specific) and external. Possible data sources include internal
        historical credit loss experience, internal ratings, credit loss experience of other
        entities and external ratings, reports and statistics. Entities that have no, or
        insufficient, sources of entity-specific data may use peer group experience for the
        comparable financial instrument (or groups of financial instruments).

B5.5.52 Historical information is an important anchor or base from which to measure
        expected credit losses. However, an entity shall adjust historical data, such as
        credit loss experience, on the basis of current observable data to reflect the effects
        of the current conditions and its forecasts of future conditions that did not affect
        the period on which the historical data is based, and to remove the effects of the
        conditions in the historical period that are not relevant to the future contractual
        cash flows. In some cases, the best reasonable and supportable information could
        be the unadjusted historical information, depending on the nature of the historical
        information and when it was calculated, compared to circumstances at the
        reporting date and the characteristics of the financial instrument being considered.
        Estimates of changes in expected credit losses should reflect, and be directionally
        consistent with, changes in related observable data from period to period (such as
        changes in unemployment rates, property prices, commodity prices, payment
        status or other factors that are indicative of credit losses on the financial
        instrument or in the group of financial instruments and in the magnitude of those
        changes). An entity shall regularly review the methodology and assumptions used
        for estimating expected credit losses to reduce any differences between estimates
        and actual credit loss experience.

B5.5.53 When using historical credit loss experience in estimating expected credit losses, it
        is important that information about historical credit loss rates is applied to groups
        that are defined in a manner that is consistent with the groups for which the
        historical credit loss rates were observed. Consequently, the method used shall
        enable each group of financial assets to be associated with information about past
        credit loss experience in groups of financial assets with similar risk characteristics
        and with relevant observable data that reflects current conditions.

B5.5.54 Expected credit losses reflect an entity's own expectations of credit losses.
        However, when considering all reasonable and supportable information that is
        available without undue cost or effort in estimating expected credit losses, an
        entity should also consider observable market information about the credit risk of
         the particular financial instrument or similar financial instruments.

         Collateral

B5.5.55 For the purposes of measuring expected credit losses, the estimate of expected
        cash shortfalls shall reflect the cash flows expected from collateral and other
        credit enhancements that are part of the contractual terms and are not recognised
        separately by the entity. The estimate of expected cash shortfalls on a
        collateralised financial instrument reflects the amount and timing of cash flows
        that are expected from foreclosure on the collateral less the costs of obtaining and
        selling the collateral, irrespective of whether foreclosure is probable (ie the
        estimate of expected cash flows considers the probability of a foreclosure and the
        cash flows that would result from it). Consequently, any cash flows that are
        expected from the realisation of the collateral beyond the contractual maturity of
        the contract should be included in this analysis. Any collateral obtained as a result
        of foreclosure is not recognised as an asset that is separate from the collateralised
        financial instrument unless it meets the relevant recognition criteria for an asset in
        this or other Standards.

         Reclassification of financial assets (Section 5.6)

B5.6.1 If an entity reclassifies financial assets in accordance with paragraph 4.4.1,
        paragraph 5.6.1 requires that the reclassification is applied prospectively from the
        reclassification date. Both the amortised cost measurement category and the fair
        value through other comprehensive income measurement category require that the
        effective interest rate is determined at initial recognition. Both of those
        measurement categories also require that the impairment requirements are applied
        in the same way. Consequently, when an entity reclassifies a financial asset
        between the amortised cost measurement category and the fair value through other
        comprehensive income measurement category:

         (a)   the recognition of interest revenue will not change and therefore the entity
               continues to use the same effective interest rate.

         (b)   the measurement of expected credit losses will not change because both
               measurement categories apply the same impairment approach. However if a
               financial asset is reclassified out of the fair value through other
               comprehensive income measurement category and into the amortised cost
               measurement category, a loss allowance would be recognised as an
               adjustment to the gross carrying amount of the financial asset from the
               reclassification date. If a financial asset is reclassified out of the amortised
               cost measurement category and into the fair value through other
               comprehensive income measurement category, the loss allowance would be
               derecognised (and thus would no longer be recognised as an adjustment to
               the gross carrying amount) but instead would be recognised as an
               accumulated impairment amount (of an equal amount) in other
               comprehensive income and would be disclosed from the reclassification
               date.

B5.6.2 However, an entity is not required to separately recognise interest revenue or
       impairment gains or losses for a financial asset measured at fair value through
       profit or loss. Consequently, when an entity reclassifies a financial asset out of the
       fair value through profit or loss measurement category, the effective interest rate
       is determined on the basis of the fair value of the asset at the reclassification date.
       In addition, for the purposes of applying Section 5.5 to the financial asset from the
       reclassification date, the date of the reclassification is treated as the date of initial
       recognition.




         Gains and losses (Section 5.7)

B5.7.1 Paragraph 5.7.5 permits an entity to make an irrevocable election to present in other
        comprehensive income changes in the fair value of an investment in an equity
        instrument that is not held for trading. This election is made on an instrument-by-
        instrument (ie share-by-share) basis. Amounts presented in other comprehensive
        income shall not be subsequently transferred to profit or loss. However, the entity
        may transfer the cumulative gain or loss within equity. Dividends on such
        investments are recognised in profit or loss in accordance with paragraph 5.7.6
        unless the dividend clearly represents a recovery of part of the cost of the
        investment.

B5.7.1A Unless paragraph 4.1.5 applies, paragraph 4.1.2A requires that a financial asset is
        measured at fair value through other comprehensive income if the contractual
        terms of the financial asset give rise to cash flows that are solely payments of
        principal and interest on the principal amount outstanding and the asset is held in
        a business model whose objective is achieved by both collecting contractual cash
        flows and selling financial assets. This measurement category recognises
        information in profit or loss as if the financial asset is measured at amortised cost,
        while the financial asset is measured in the balance sheet at fair value. Gains or
        losses, other than those that are recognised in profit or loss in accordance with
        paragraphs 5.7.10­5.7.11, are recognised in other comprehensive income. When
        these financial assets are derecognised, cumulative gains or losses previously
        recognised in other comprehensive income are reclassified to profit or loss. This
        reflects the gain or loss that would have been recognised in profit or loss upon
        derecognition if the financial asset had been measured at amortised cost.

B5.7.2 An entity applies Ind AS 21 to financial assets and financial liabilities that are
         monetary items in accordance with Ind AS 21 and denominated in a foreign
         currency. Ind AS 21 requires any foreign exchange gains and losses on monetary
         assets and monetary liabilities to be recognised in profit or loss. An exception is a
         monetary item that is designated as a hedging instrument in a cash flow hedge
         (see paragraph 6.5.11), a hedge of a net investment (see paragraph 6.5.13) or a fair
         value hedge of an equity instrument for which an entity has elected to present
         changes in fair value in other comprehensive income in accordance with
         paragraph 5.7.5 (see paragraph 6.5.8).

B5.7.2A For the purpose of recognising foreign exchange gains and losses under Ind AS
        21, a financial asset measured at fair value through other comprehensive income
        in accordance with paragraph 4.1.2A is treated as a monetary item. Accordingly,
        such a financial asset is treated as an asset measured at amortised cost in the
        foreign currency. Exchange differences on the amortised cost are recognised in
        profit or loss and other changes in the carrying amount are recognised in
        accordance with paragraph 5.7.10.

B5.7.3 Paragraph 5.7.5 permits an entity to make an irrevocable election to present in other
        comprehensive income subsequent changes in the fair value of particular
        investments in equity instruments. Such an investment is not a monetary item.
        Accordingly, the gain or loss that is presented in other comprehensive income in
        accordance with paragraph 5.7.5 includes any related foreign exchange
        component.

B5.7.4 If there is a hedging relationship between a non-derivative monetary asset and a
        non-derivative monetary liability, changes in the foreign currency component of
        those financial instruments are presented in profit or loss.

         Liabilities designated as at fair value through profit or loss

B5.7.5 When an entity designates a financial liability as at fair value through profit or loss,
        it must determine whether presenting in other comprehensive income the effects
        of changes in the liability's credit risk would create or enlarge an accounting
        mismatch in profit or loss. An accounting mismatch would be created or enlarged
        if presenting the effects of changes in the liability's credit risk in other
        comprehensive income would result in a greater mismatch in profit or loss than if
        those amounts were presented in profit or loss.

B5.7.6 To make that determination, an entity must assess whether it expects that the effects
        of changes in the liability's credit risk will be offset in profit or loss by a change
        in the fair value of another financial instrument measured at fair value through
        profit or loss. Such an expectation must be based on an economic relationship
        between the characteristics of the liability and the characteristics of the other
        financial instrument.
B5.7.7 That determination is made at initial recognition and is not reassessed. For practical
        purposes the entity need not enter into all of the assets and liabilities giving rise to
        an accounting mismatch at exactly the same time. A reasonable delay is permitted
        provided that any remaining transactions are expected to occur. An entity must
        apply consistently its methodology for determining whether presenting in other
        comprehensive income the effects of changes in the liability's credit risk would
        create or enlarge an accounting mismatch in profit or loss. However, an entity
        may use different methodologies when there are different economic relationships
        between the characteristics of the liabilities designated as at fair value through
        profit or loss and the characteristics of the other financial instruments. Ind AS 107
        requires an entity to provide qualitative disclosures in the notes to the financial
        statements about its methodology for making that determination.

B5.7.8 If such a mismatch would be created or enlarged, the entity is required to present all
         changes in fair value (including the effects of changes in the credit risk of the
         liability) in profit or loss. If such a mismatch would not be created or enlarged, the
         entity is required to present the effects of changes in the liability's credit risk in
         other comprehensive income.

B5.7.9 Amounts presented in other comprehensive income shall not be subsequently
       transferred to profit or loss. However, the entity may transfer the cumulative gain
       or loss within equity.

B5.7.10 The following example describes a situation in which an accounting mismatch
        would be created in profit or loss if the effects of changes in the credit risk of the
        liability were presented in other comprehensive income. A mortgage bank
        provides loans to customers and funds those loans by selling bonds
        withvmatching characteristics (eg amount outstanding, repayment profile, term
        and currency) in the market. The contractual terms of the loan permit the
        mortgage customer to prepay its loan (ie satisfy its obligation to the bank) by
        buying the corresponding bond at fair value in the market and delivering that bond
        to the mortgage bank. As a result of that contractual prepayment right, if the credit
        quality of the bond worsens (and, thus, the fair value of the mortgage bank's
        liability decreases), the fair value of the mortgage bank's loan asset also
        decreases. The change in the fair value of the asset reflects the mortgage
        customer's contractual right to prepay the mortgage loan by buying the underlying
        bond at fair value (which, in this example, has decreased) and delivering the bond
        to the mortgage bank. Consequently, the effects of changes in the credit risk of the
        liability (the bond) will be offset in profit or loss by a corresponding change in the
        fair value of a financial asset (the loan). If the effects of changes in the liability's
        credit risk were presented in other comprehensive income there would be an
        accounting mismatch in profit or loss. Consequently, the mortgage bank is
        required to present all changes in fair value of the liability (including the effects of
         changes in the liability's credit risk) in profit or loss.

B5.7.11 In the example in paragraph B5.7.10, there is a contractual linkage between the
        effects of changes in the credit risk of the liability and changes in the fair value of
        the financial asset (ie as a result of the mortgage customer's contractual right to
        prepay the loan by buying the bond at fair value and delivering the bond to the
        mortgage bank). However, an accounting mismatch may also occur in the absence
        of a contractual linkage.

B5.7.12 For the purposes of applying the requirements in paragraphs 5.7.7 and 5.7.8, an
        accounting mismatch is not caused solely by the measurement method that an
        entity uses to determine the effects of changes in a liability's credit risk. An
        accounting mismatch in profit or loss would arise only when the effects of
        changes in the liability's credit risk (as defined in Ind AS 107) are expected to be
        offset by changes in the fair value of another financial instrument. A mismatch
        that arises solely as a result of the measurement method (ie because an entity does
        not isolate changes in a liability's credit risk from some other changes in its fair
        value) does not affect the determination required by paragraphs 5.7.7 and 5.7.8.
        For example, an entity may not isolate changes in a liability's credit risk from
        changes in liquidity risk. If the entity presents the combined effect of both factors
        in other comprehensive income, a mismatch may occur because changes in
        liquidity risk may be included in the fair value measurement of the entity's
        financial assets and the entire fair value change of those assets is presented in
        profit or loss. However, such a mismatch is caused by measurement imprecision,
        not the offsetting relationship described in paragraph B5.7.6 and, therefore, does
        not affect the determination required by paragraphs 5.7.7 and 5.7.8.

         The meaning of `credit risk' (paragraphs 5.7.7 and 5.7.8)

B5.7.13 Ind AS 107 defines credit risk as `the risk that one party to a financial instrument
        will cause a financial loss for the other party by failing to discharge an obligation'.
        The requirement in paragraph 5.7.7(a) relates to the risk that the issuer will fail to
        perform on that particular liability. It does not necessarily relate to the
        creditworthiness of the issuer. For example, if an entity issues a collateralised
        liability and a non-collateralised liability that are otherwise identical, the credit
        risk of those two liabilities will be different, even though they are issued by the
        same entity. The credit risk on the collateralised liability will be less than the
        credit risk of the non-collateralised liability. The credit risk for a collateralised
        liability may be close to zero.

B5.7.14 For the purposes of applying the requirement in paragraph 5.7.7(a), credit risk is
        different from asset-specific performance risk. Asset-specific performance risk is
        not related to the risk that an entity will fail to discharge a particular obligation but
        instead it is related to the risk that a single asset or a group of assets will perform
        poorly (or not at all).

B5.7.15 The following are examples of asset-specific performance risk:

        (a)   a liability with a unit-linking feature whereby the amount due to investors is
              contractually determined on the basis of the performance of specified assets.
              The effect of that unit-linking feature on the fair value of the liability is
              asset-specific performance risk, not credit risk.

        (b)   a liability issued by a structured entity with the following characteristics.
              The entity is legally isolated so the assets in the entity are ring-fenced solely
              for the benefit of its investors, even in the event of bankruptcy. The entity
              enters into no other transactions and the assets in the entity cannot be
              hypothecated. Amounts are due to the entity's investors only if the ring-
              fenced assets generate cash flows. Thus, changes in the fair value of the
              liability primarily reflect changes in the fair value of the assets. The effect of
              the performance of the assets on the fair value of the liability is asset-
              specific performance risk, not credit risk.

        Determining the effects of changes in credit risk

B5.7.16 For the purposes of applying the requirement in paragraph 5.7.7(a), an entity shall
        determine the amount of change in the fair value of the financial liability that is
        attributable to changes in the credit risk of that liability either:

        (a)     as the amount of change in its fair value that is not attributable to changes
                in market conditions that give rise to market risk (see paragraphs B5.7.17
                and B5.7.18); or

        (b)     using an alternative method the entity believes more faithfully represents
                the amount of change in the liability's fair value that is attributable to
                changes in its credit risk.

B5.7.17 Changes in market conditions that give rise to market risk include changes in a
        benchmark interest rate, the price of another entity's financial instrument, a
        commodity price, a foreign exchange rate or an index of prices or rates.

B5.7.18 If the only significant relevant changes in market conditions for a liability are
        changes in an observed (benchmark) interest rate, the amount in paragraph
        B5.7.16(a) can be estimated as follows:

        (a)     First, the entity computes the liability's internal rate of return at the start of
                the period using the fair value of the liability and the liability's contractual
                cash flows at the start of the period. It deducts from this rate of return the
                observed (benchmark) interest rate at the start of the period, to arrive at an
                instrument-specific component of the internal rate of return.

        (b)     Next, the entity calculates the present value of the cash flows associated
                with the liability using the liability's contractual cash flows at the end of
                the period and a discount rate equal to the sum of (i) the observed
                (benchmark) interest rate at the end of the period and (ii) the instrument-
                specific component of the internal rate of return as determined in (a).

        (c)     The difference between the fair value of the liability at the end of the
                period and the amount determined in (b) is the change in fair value that is
                not attributable to changes in the observed (benchmark) interest rate. This
                is the amount to be presented in other comprehensive income in
                accordance with paragraph 5.7.7(a).

B5.7.19 The example in paragraph B5.7.18 assumes that changes in fair value arising from
        factors other than changes in the instrument's credit risk or changes in observed
        (benchmark) interest rates are not significant. This method would not be
        appropriate if changes in fair value arising from other factors are significant. In
        those cases, an entity is required to use an alternative method that more faithfully
        measures the effects of changes in the liability's credit risk (see paragraph
        B5.7.16(b)). For example, if the instrument in the example contains an embedded
        derivative, the change in fair value of the embedded derivative is excluded in
        determining the amount to be presented in other comprehensive income in
        accordance with paragraph 5.7.7(a).

B5.7.20 As with all fair value measurements, an entity's measurement method for
        determining the portion of the change in the liability's fair value that is
        attributable to changes in its credit risk must make maximum use of relevant
        observable inputs and minimum use of unobservable inputs.

        Hedge accounting (Chapter 6)

        Hedging instruments (Section 6.2)

        Qualifying instruments

B6.2.1 Derivatives that are embedded in hybrid contracts, but that are not separately
       accounted for, cannot be designated as separate hedging instruments.

B6.2.2 An entity's own equity instruments are not financial assets or financial liabilities
       of the entity and therefore cannot be designated as hedging instruments.

B6.2.3 For hedges of foreign currency risk, the foreign currency risk component of a non-
        derivative financial instrument is determined in accordance with Ind AS 21.

        Written options

B6.2.4 This Standard does not restrict the circumstances in which a derivative that is
       measured at fair value through profit or loss may be designated as a hedging
       instrument, except for some written options. A written option does not qualify as a
       hedging instrument unless it is designated as an offset to a purchased option,
       including one that is embedded in another financial instrument (for example, a
       written call option used to hedge a callable liability).

        Designation of hedging instruments

B6.2.5 For hedges other than hedges of foreign currency risk, when an entity designates a
        non-derivative financial asset or a non-derivative financial liability measured at
        fair value through profit or loss as a hedging instrument, it may only designate the
        non-derivative financial instrument in its entirety or a proportion of it.

B6.2.6 A single hedging instrument may be designated as a hedging instrument of more
        than one type of risk, provided that there is a specific designation of the hedging
        instrument and of the different risk positions as hedged items. Those hedged items
        can be in different hedging relationships.

        Hedged items (Section 6.3)

        Qualifying items

B6.3.1 A firm commitment to acquire a business in a business combination cannot be a
        hedged item, except for foreign currency risk, because the other risks being
        hedged cannot be specifically identified and measured. Those other risks are
        general business risks.

B6.3.2 An equity method investment cannot be a hedged item in a fair value hedge. This is
        because the equity method recognises in profit or loss the investor's share of the
        investee's profit or loss, instead of changes in the investment's fair value. For a
        similar reason, an investment in a consolidated subsidiary cannot be a hedged item
        in a fair value hedge. This is because consolidation recognises in profit or loss the
        subsidiary's profit or loss, instead of changes in the investment's fair value. A
        hedge of a net investment in a foreign operation is different because it is a hedge
        of the foreign currency exposure, not a fair value hedge of the change in the value
        of the investment.

B6.3.3 Paragraph 6.3.4 permits an entity to designate as hedged items aggregated
       exposures that are a combination of an exposure and a derivative. When
        designating such a hedged item, an entity assesses whether the aggregated
        exposure combines an exposure with a derivative so that it creates a different
        aggregated exposure that is managed as one exposure for a particular risk (or
        risks). In that case, the entity may designate the hedged item on the basis of the
        aggregated exposure. For example:

        (a)   an entity may hedge a given quantity of highly probable coffee purchases in
              15 months' time against price risk (based on US dollars) using a 15-month
              futures contract for coffee. The highly probable coffee purchases and the
              futures contract for coffee in combination can be viewed as a 15-month
              fixed-amount US dollar foreign currency risk exposure for risk management
              purposes (ie like any fixed-amount US dollar cash outflow in 15 months'
              time).
        (b)   an entity may hedge the foreign currency risk for the entire term of a 10-
              year fixed-rate debt denominated in a foreign currency. However, the entity
              requires fixed-rate exposure in its functional currency only for a short to
              medium term (say two years) and floating rate exposure in its functional
              currency for the remaining term to maturity. At the end of each of the two-
              year intervals (ie on a two-year rolling basis) the entity fixes the next two
              years' interest rate exposure (if the interest level is such that the entity wants
              to fix interest rates). In such a situation an entity may enter into a 10-year
              fixed-to-floating cross-currency interest rate swap that swaps the fixed-rate
              foreign currency debt into a variable-rate functional currency exposure. This
              is overlaid with a two-year interest rate swap that--on the basis of the
              functional currency--swaps variable-rate debt into fixed-rate debt. In effect,
              the fixed-rate foreign currency debt and the 10-year fixed-to-floating cross-
              currency interest rate swap in combination are viewed as a 10-year variable-
              rate debt functional currency exposure for risk management purposes.

B6.3.4 When designating the hedged item on the basis of the aggregated exposure, an
        entity considers the combined effect of the items that constitute the aggregated
        exposure for the purpose of assessing hedge effectiveness and measuring hedge
        ineffectiveness. However, the items that constitute the aggregated exposure
        remain accounted for separately. This means that, for example:

        (a)   derivatives that are part of an aggregated exposure are recognised as
              separate assets or liabilities measured at fair value; and

        (b)   if a hedging relationship is designated between the items that constitute the
              aggregated exposure, the way in which a derivative is included as part of an
              aggregated exposure must be consistent with the designation of that
              derivative as the hedging instrument at the level of the aggregated exposure.
              For example, if an entity excludes the forward element of a derivative from
              its designation as the hedging instrument for the hedging relationship
               between the items that constitute the aggregated exposure, it must also
               exclude the forward element when including that derivative as a hedged
               item as part of the aggregated exposure. Otherwise, the aggregated exposure
               shall include a derivative, either in its entirety or a proportion of it.

B6.3.5 Paragraph 6.3.6 states that in consolidated financial statements the foreign currency
        risk of a highly probable forecast intragroup transaction may qualify as a hedged
        item in a cash flow hedge, provided that the transaction is denominated in a
        currency other than the functional currency of the entity entering into that
        transaction and that the foreign currency risk will affect consolidated profit or
        loss. For this purpose an entity can be a parent, subsidiary, associate, joint
        arrangement or branch. If the foreign currency risk of a forecast intragroup
        transaction does not affect consolidated profit or loss, the intragroup transaction
        cannot qualify as a hedged item. This is usually the case for royalty payments,
        interest payments or management charges between members of the same group,
        unless there is a related external transaction. However, when the foreign currency
        risk of a forecast intragroup transaction will affect consolidated profit or loss, the
        intragroup transaction can qualify as a hedged item. An example is forecast sales
        or purchases of inventories between members of the same group if there is an
        onward sale of the inventory to a party external to the group. Similarly, a forecast
        intragroup sale of plant and equipment from the group entity that manufactured it
        to a group entity that will use the plant and equipment in its operations may affect
        consolidated profit or loss. This could occur, for example, because the plant and
        equipment will be depreciated by the purchasing entity and the amount initially
        recognised for the plant and equipment may change if the forecast intragroup
        transaction is denominated in a currency other than the functional currency of the
        purchasing entity.

B6.3.6 If a hedge of a forecast intragroup transaction qualifies for hedge accounting, any
       gain or loss is recognised in, and taken out of, other comprehensive income in
       accordance with paragraph 6.5.11. The relevant period or periods during which
       the foreign currency risk of the hedged transaction affects profit or loss is when it
       affects consolidated profit or loss.

         Designation of hedged items

B6.3.7 A component is a hedged item that is less than the entire item. Consequently, a
        component reflects only some of the risks of the item of which it is a part or
        reflects the risks only to some extent (for example, when designating a proportion
        of an item).

         Risk components

B6.3.8 To be eligible for designation as a hedged item, a risk component must be a
        separately identifiable component of the financial or the non-financial item, and
        the changes in the cash flows or the fair value of the item attributable to changes
        in that risk component must be reliably measurable.

B6.3.9 When identifying what risk components qualify for designation as a hedged item,
       an entity assesses such risk components within the context of the particular market
       structure to which the risk or risks relate and in which the hedging activity takes
       place. Such a determination requires an evaluation of the relevant facts and
       circumstances, which differ by risk and market.

B6.3.10 When designating risk components as hedged items, an entity considers whether
        the risk components are explicitly specified in a contract (contractually specified
        risk components) or whether they are implicit in the fair value or the cash flows of
        an item of which they are a part (non-contractually specified risk components).
        Non-contractually specified risk components can relate to items that are not a
        contract (for example, forecast transactions) or contracts that do not explicitly
        specify the component (for example, a firm commitment that includes only one
        single price instead of a pricing formula that references different underlyings). For
        example:

        (a)   Entity A has a long-term supply contract for natural gas that is priced using
              a contractually specified formula that references commodities and other
              factors (for example, gas oil, fuel oil and other components such as transport
              charges). Entity A hedges the gas oil component in that supply contract
              using a gas oil forward contract. Because the gas oil component is specified
              by the terms and conditions of the supply contract it is a contractually
              specified risk component. Hence, because of the pricing formula, Entity A
              concludes that the gas oil price exposure is separately identifiable. At the
              same time, there is a market for gas oil forward contracts. Hence, Entity A
              concludes that the gas oil price exposure is reliably measurable.
              Consequently, the gas oil price exposure in the supply contract is a risk
              component that is eligible for designation as a hedged item.

        (b)   Entity B hedges its future coffee purchases based on its production forecast.
              Hedging starts up to 15 months before delivery for part of the forecast
              purchase volume. Entity B increases the hedged volume over time (as the
              delivery date approaches). Entity B uses two different types of contracts to
              manage its coffee price risk:

              (i)    exchange-traded coffee futures contracts; and

              (ii)   coffee supply contracts for Arabica coffee from Colombia delivered to
                     a specific manufacturing site. These contracts price a tonne of coffee
                     based on the exchange-traded coffee futures contract price plus a fixed
            price differential plus a variable logistics services charge using a
            pricing formula. The coffee supply contract is an executory contract in
            accordance with which Entity B takes actual delivery of coffee.

      For deliveries that relate to the current harvest, entering into the coffee
      supply contracts allows Entity B to fix the price differential between the
      actual coffee quality purchased (Arabica coffee from Colombia) and the
      benchmark quality that is the underlying of the exchange-traded futures
      contract. However, for deliveries that relate to the next harvest, the coffee
      supply contracts are not yet available, so the price differential cannot be
      fixed. Entity B uses exchange-traded coffee futures contracts to hedge the
      benchmark quality component of its coffee price risk for deliveries that
      relate to the current harvest as well as the next harvest. Entity B determines
      that it is exposed to three different risks: coffee price risk reflecting the
      benchmark quality, coffee price risk reflecting the difference (spread)
      between the price for the benchmark quality coffee and the particular
      Arabica coffee from Colombia that it actually receives, and the variable
      logistics costs. For deliveries related to the current harvest, after Entity B
      enters into a coffee supply contract, the coffee price risk reflecting the
      benchmark quality is a contractually specified risk component because the
      pricing formula includes an indexation to the exchange-traded coffee futures
      contract price. Entity B concludes that this risk component is separately
      identifiable and reliably measurable. For deliveries related to the next
      harvest, Entity B has not yet entered into any coffee supply contracts (ie
      those deliveries are forecast transactions). Hence, the coffee price risk
      reflecting the benchmark quality is a non-contractually specified risk
      component. Entity B's analysis of the market structure takes into account
      how eventual deliveries of the particular coffee that it receives are priced.
      Hence, on the basis of this analysis of the market structure, Entity B
      concludes that the forecast transactions also involve the coffee price risk that
      reflects the benchmark quality as a risk component that is separately
      identifiable and reliably measurable even though it is not contractually
      specified. Consequently, Entity B may designate hedging relationships on a
      risk components basis (for the coffee price risk that reflects the benchmark
      quality) for coffee supply contracts as well as forecast transactions.

(c)   Entity C hedges part of its future jet fuel purchases on the basis of its
      consumption forecast up to 24 months before delivery and increases the
      volume that it hedges over time. Entity C hedges this exposure using
      different types of contracts depending on the time horizon of the hedge,
      which affects the market liquidity of the derivatives. For the longer time
      horizons (12­24 months) Entity C uses crude oil contracts because only
      these have sufficient market liquidity. For time horizons of 6­12 months
      Entity C uses gas oil derivatives because they are sufficiently liquid. For
      time horizons up to six months Entity C uses jet fuel contracts. Entity C's
      analysis of the market structure for oil and oil products and its evaluation of
      the relevant facts and circumstances is as follows:

      (i)    Entity C operates in a geographical area in which Brent is the crude oil
             benchmark. Crude oil is a raw material benchmark that affects the
             price of various refined oil products as their most basic input. Gas oil
             is a benchmark for refined oil products, which is used as a pricing
             reference for oil distillates more generally. This is also reflected in the
             types of derivative financial instruments for the crude oil and refined
             oil products markets of the environment in which Entity C operates,
             such as:

                   the benchmark crude oil futures contract, which is for Brent
                   crude oil;

                   the benchmark gas oil futures contract, which is used as the
                   pricing reference for distillates--for example, jet fuel spread
                   derivatives cover the price differential between jet fuel and that
                   benchmark gas oil; and

                   the benchmark gas oil crack spread derivative (ie the derivative
                   for the price differential between crude oil and gas oil--a
                   refining margin), which is indexed to Brent crude oil.

      (ii)   the pricing of refined oil products does not depend on which particular
             crude oil is processed by a particular refinery because those refined oil
             products (such as gas oil or jet fuel) are standardised products.

      Hence, Entity C concludes that the price risk of its jet fuel purchases
      includes a crude oil price risk component based on Brent crude oil and a gas
      oil price risk component, even though crude oil and gas oil are not specified
      in any contractual arrangement. Entity C concludes that these two risk
      components are separately identifiable and reliably measurable even though
      they are not contractually specified. Consequently, Entity C may designate
      hedging relationships for forecast jet fuel purchases on a risk components
      basis (for crude oil or gas oil). This analysis also means that if, for example,
      Entity C used crude oil derivatives based on West Texas Intermediate (WTI)
      crude oil, changes in the price differential between Brent crude oil and WTI
      crude oil would cause hedge ineffectiveness.

(d)   Entity D holds a fixed-rate debt instrument. This instrument is issued in an
      environment with a market in which a large variety of similar debt
      instruments are compared by their spreads to a benchmark rate (for example,
               LIBOR) and variable-rate instruments in that environment are typically
               indexed to that benchmark rate. Interest rate swaps are frequently used to
               manage interest rate risk on the basis of that benchmark rate, irrespective of
               the spread of debt instruments to that benchmark rate. The price of fixed-
               rate debt instruments varies directly in response to changes in the
               benchmark rate as they happen. Entity D concludes that the benchmark rate
               is a component that can be separately identified and reliably measured.
               Consequently, Entity D may designate hedging relationships for the fixed-
               rate debt instrument on a risk component basis for the benchmark interest
               rate risk.

B6.3.11 When designating a risk component as a hedged item, the hedge accounting
        requirements apply to that risk component in the same way as they apply to other
        hedged items that are not risk components. For example, the qualifying criteria
        apply, including that the hedging relationship must meet the hedge effectiveness
        requirements, and any hedge ineffectiveness must be measured and recognised.

B6.3.12 An entity can also designate only changes in the cash flows or fair value of a
        hedged item above or below a specified price or other variable (a `one-sided
        risk'). The intrinsic value of a purchased option hedging instrument (assuming
        that it has the same principal terms as the designated risk), but not its time value,
        reflects a one-sided risk in a hedged item. For example, an entity can designate the
        variability of future cash flow outcomes resulting from a price increase of a
        forecast commodity purchase. In such a situation, the entity designates only cash
        flow losses that result from an increase in the price above the specified level. The
        hedged risk does not include the time value of a purchased option, because the
        time value is not a component of the forecast transaction that affects profit or loss.

B6.3.13 There is a rebuttable presumption that unless inflation risk is contractually
        specified, it is not separately identifiable and reliably measurable and hence
        cannot be designated as a risk component of a financial instrument. However, in
        limited cases, it is possible to identify a risk component for inflation risk that is
        separately identifiable and reliably measurable because of the particular
        circumstances of the inflation environment and the relevant debt market.

B6.3.14 For example, an entity issues debt in an environment in which inflation-linked
        bonds have a volume and term structure that results in a sufficiently liquid market
        that allows constructing a term structure of zero-coupon real interest rates. This
        means that for the respective currency, inflation is a relevant factor that is
        separately considered by the debt markets. In those circumstances the inflation
        risk component could be determined by discounting the cash flows of the hedged
        debt instrument using the term structure of zero-coupon real interest rates (ie in a
        manner similar to how a risk-free (nominal) interest rate component can be
        determined). Conversely, in many cases an inflation risk component is not
        separately identifiable and reliably measurable. For example, an entity issues only
        nominal interest rate debt in an environment with a market for inflation-linked
        bonds that is not sufficiently liquid to allow a term structure of zero-coupon real
        interest rates to be constructed. In this case the analysis of the market structure
        and of the facts and circumstances does not support the entity concluding that
        inflation is a relevant factor that is separately considered by the debt markets.
        Hence, the entity cannot overcome the rebuttable presumption that inflation risk
        that is not contractually specified is not separately identifiable and reliably
        measurable. Consequently, an inflation risk component would not be eligible for
        designation as the hedged item. This applies irrespective of any inflation hedging
        instrument that the entity has actually entered into. In particular, the entity cannot
        simply impute the terms and conditions of the actual inflation hedging instrument
        by projecting its terms and conditions onto the nominal interest rate debt.

B6.3.15 A contractually specified inflation risk component of the cash flows of a
        recognised inflation-linked bond (assuming that there is no requirement to account
        for an embedded derivative separately) is separately identifiable and reliably
        measurable, as long as other cash flows of the instrument are not affected by the
        inflation risk component.

        Components of a nominal amount

B6.3.16 There are two types of components of nominal amounts that can be designated as
        the hedged item in a hedging relationship: a component that is a proportion of an
        entire item or a layer component. The type of component changes the accounting
        outcome. An entity shall designate the component for accounting purposes
        consistently with its risk management objective.

B6.3.17 An example of a component that is a proportion is 50 per cent of the contractual
        cash flows of a loan.

B6.3.18 A layer component may be specified from a defined, but open, population, or
        from a defined nominal amount. Examples include:

        (a)           part of a monetary transaction volume, for example, the next FC10 cash
                      flows from sales denominated in a foreign currency after the first FC20 in
                      March 201X;4

        (b)           a part of a physical volume, for example, the bottom layer, measuring 5
                      million cubic metres, of the natural gas stored in location XYZ;


                                                                    
        4
          In this Standard monetary amounts are denominated in `Indian Rupees' (Rs.) and `foreign
        currency units' (FC). 
        (c)     a part of a physical or other transaction volume, for example, the first 100
                barrels of the oil purchases in June 201X or the first 100 MWh of
                electricity sales in June 201X; or

        (d)   a layer from the nominal amount of the hedged item, for example, the last
              Rs.80 million of a Rs.100 million firm commitment, the bottom layer of
              Rs.20 million of a Rs.100 million fixed-rate bond or the top layer of Rs.30
              million from a total amount of Rs.100 million of fixed-rate debt that can be
              prepaid at fair value (the defined nominal amount is Rs.100 million).

B6.3.19 If a layer component is designated in a fair value hedge, an entity shall specify it
        from a defined nominal amount. To comply with the requirements for qualifying
        fair value hedges, an entity shall remeasure the hedged item for fair value changes
        (ie remeasure the item for fair value changes attributable to the hedged risk). The
        fair value hedge adjustment must be recognised in profit or loss no later than
        when the item is derecognised. Consequently, it is necessary to track the item to
        which the fair value hedge adjustment relates. For a layer component in a fair
        value hedge, this requires an entity to track the nominal amount from which it is
        defined. For example, in paragraph B6.3.18(d), the total defined nominal amount
        of Rs.100 million must be tracked in order to track the bottom layer of Rs.20
        million or the top layer of Rs.30 million.

B6.3.20 A layer component that includes a prepayment option is not eligible to be
        designated as a hedged item in a fair value hedge if the prepayment option's fair
        value is affected by changes in the hedged risk, unless the designated layer
        includes the effect of the related prepayment option when determining the change
        in the fair value of the hedged item.

        Relationship between components and the total cash flows of an item

B6.3.21 If a component of the cash flows of a financial or a non-financial item is
        designated as the hedged item, that component must be less than or equal to the
        total cash flows of the entire item. However, all of the cash flows of the entire
        item may be designated as the hedged item and hedged for only one particular risk
        (for example, only for those changes that are attributable to changes in LIBOR or
        a benchmark commodity price).

B6.3.22 For example, in the case of a financial liability whose effective interest rate is
        below LIBOR, an entity cannot designate:

        (a)   a component of the liability equal to interest at LIBOR (plus the principal
              amount in case of a fair value hedge); and

        (b)   a negative residual component.
B6.3.23 However, in the case of a fixed-rate financial liability whose effective interest rate
        is (for example) 100 basis points below LIBOR, an entity can designate as the
        hedged item the change in the value of that entire liability (ie principal plus
        interest at LIBOR minus 100 basis points) that is attributable to changes in
        LIBOR. If a fixed-rate financial instrument is hedged some time after its
        origination and interest rates have changed in the meantime, the entity can
        designate a risk component equal to a benchmark rate that is higher than the
        contractual rate paid on the item. The entity can do so provided that the
        benchmark rate is less than the effective interest rate calculated on the assumption
        that the entity had purchased the instrument on the day when it first designates the
        hedged item. For example, assume that an entity originates a fixed-rate financial
        asset of Rs.100 that has an effective interest rate of 6 per cent at a time when
        LIBOR is 4 per cent. It begins to hedge that asset some time later when LIBOR
        has increased to 8 per cent and the fair value of the asset has decreased to Rs.90.
        The entity calculates that if it had purchased the asset on the date it first designates
        the related LIBOR interest rate risk as the hedged item, the effective yield of the
        asset based on its then fair value of Rs.90 would have been 9.5 per cent. Because
        LIBOR is less than this effective yield, the entity can designate a LIBOR
        component of 8 per cent that consists partly of the contractual interest cash flows
        and partly of the difference between the current fair value (ie Rs.90) and the
        amount repayable on maturity (ie Rs.100).

B6.3.24 If a variable-rate financial liability bears interest of (for example) three-month
        LIBOR minus 20 basis points (with a floor at zero basis points), an entity can
        designate as the hedged item the change in the cash flows of that entire liability (ie
        three-month LIBOR minus 20 basis points--including the floor) that is
        attributable to changes in LIBOR. Hence, as long as the three-month LIBOR
        forward curve for the remaining life of that liability does not fall below 20 basis
        points, the hedged item has the same cash flow variability as a liability that bears
        interest at three-month LIBOR with a zero or positive spread. However, if the
        three-month LIBOR forward curve for the remaining life of that liability (or a part
        of it) falls below 20 basis points, the hedged item has a lower cash flow variability
        than a liability that bears interest at three-month LIBOR with a zero or positive
        spread.

B6.3.25 A similar example of a non-financial item is a specific type of crude oil from a
        particular oil field that is priced off the relevant benchmark crude oil. If an entity
        sells that crude oil under a contract using a contractual pricing formula that sets
        the price per barrel at the benchmark crude oil price minus Rs.10 with a floor of
        Rs.15, the entity can designate as the hedged item the entire cash flow variability
        under the sales contract that is attributable to the change in the benchmark crude
        oil price. However, the entity cannot designate a component that is equal to the
        full change in the benchmark crude oil price. Hence, as long as the forward price
        (for each delivery) does not fall below Rs.25, the hedged item has the same cash
        flow variability as a crude oil sale at the benchmark crude oil price (or with a
        positive spread). However, if the forward price for any delivery falls below Rs.25,
        the hedged item has a lower cash flow variability than a crude oil sale at the
        benchmark crude oil price (or with a positive spread).

        Qualifying criteria for hedge accounting (Section 6.4)

        Hedge effectiveness

B6.4.1 Hedge effectiveness is the extent to which changes in the fair value or the cash
        flows of the hedging instrument offset changes in the fair value or the cash flows
        of the hedged item (for example, when the hedged item is a risk component, the
        relevant change in fair value or cash flows of an item is the one that is attributable
        to the hedged risk). Hedge ineffectiveness is the extent to which the changes in the
        fair value or the cash flows of the hedging instrument are greater or less than those
        on the hedged item.

B6.4.2 When designating a hedging relationship and on an ongoing basis, an entity shall
        analyse the sources of hedge ineffectiveness that are expected to affect the
        hedging relationship during its term. This analysis (including any updates in
        accordance with paragraph B6.5.21 arising from rebalancing a hedging
        relationship) is the basis for the entity's assessment of meeting the hedge
        effectiveness requirements.

B6.4.3 For the avoidance of doubt, the effects of replacing the original counterparty with a
        clearing counterparty and making the associated changes as described in
        paragraph 6.5.6 shall be reflected in the measurement of the hedging instrument
        and therefore in the assessment of hedge effectiveness and the measurement of
        hedge effectiveness.

        Economic relationship between the hedged item and the hedging instrument

B6.4.4 The requirement that an economic relationship exists means that the hedging
        instrument and the hedged item have values that generally move in the opposite
        direction because of the same risk, which is the hedged risk. Hence, there must be
        an expectation that the value of the hedging instrument and the value of the
        hedged item will systematically change in response to movements in either the
        same underlying or underlyings that are economically related in such a way that
        they respond in a similar way to the risk that is being hedged (for example, Brent
        and WTI crude oil).

B6.4.5 If the underlyings are not the same but are economically related, there can be
        situations in which the values of the hedging instrument and the hedged item
         move in the same direction, for example, because the price differential between
         the two related underlyings changes while the underlyings themselves do not
         move significantly. That is still consistent with an economic relationship between
         the hedging instrument and the hedged item if the values of the hedging
         instrument and the hedged item are still expected to typically move in the opposite
         direction when the underlyings move.

B6.4.6 The assessment of whether an economic relationship exists includes an analysis of
        the possible behaviour of the hedging relationship during its term to ascertain
        whether it can be expected to meet the risk management objective. The mere
        existence of a statistical correlation between two variables does not, by itself,
        support a valid conclusion that an economic relationship exists.

         The effect of credit risk

B6.4.7 Because the hedge accounting model is based on a general notion of offset between
        gains and losses on the hedging instrument and the hedged item, hedge
        effectiveness is determined not only by the economic relationship between those
        items (ie the changes in their underlyings) but also by the effect of credit risk on
        the value of both the hedging instrument and the hedged item. The effect of credit
        risk means that even if there is an economic relationship between the hedging
        instrument and the hedged item, the level of offset might become erratic. This can
        result from a change in the credit risk of either the hedging instrument or the
        hedged item that is of such a magnitude that the credit risk dominates the value
        changes that result from the economic relationship (ie the effect of the changes in
        the underlyings). A level of magnitude that gives rise to dominance is one that
        would result in the loss (or gain) from credit risk frustrating the effect of changes
        in the underlyings on the value of the hedging instrument or the hedged item, even
        if those changes were significant. Conversely, if during a particular period there is
        little change in the underlyings, the fact that even small credit risk-related changes
        in the value of the hedging instrument or the hedged item might affect the value
        more than the underlyings does not create dominance.

B6.4.8 An example of credit risk dominating a hedging relationship is when an entity
        hedges an exposure to commodity price risk using an uncollateralised derivative.
        If the counterparty to that derivative experiences a severe deterioration in its credit
        standing, the effect of the changes in the counterparty's credit standing might
        outweigh the effect of changes in the commodity price on the fair value of the
        hedging instrument, whereas changes in the value of the hedged item depend
        largely on the commodity price changes.

         Hedge ratio

B6.4.9 In accordance with the hedge effectiveness requirements, the hedge ratio of the
        hedging relationship must be the same as that resulting from the quantity of the
        hedged item that the entity actually hedges and the quantity of the hedging
        instrument that the entity actually uses to hedge that quantity of hedged item.
        Hence, if an entity hedges less than 100 per cent of the exposure on an item, such
        as 85 per cent, it shall designate the hedging relationship using a hedge ratio that
        is the same as that resulting from 85 per cent of the exposure and the quantity of
        the hedging instrument that the entity actually uses to hedge those 85 per cent.
        Similarly, if, for example, an entity hedges an exposure using a nominal amount
        of 40 units of a financial instrument, it shall designate the hedging relationship
        using a hedge ratio that is the same as that resulting from that quantity of 40 units
        (ie the entity must not use a hedge ratio based on a higher quantity of units that it
        might hold in total or a lower quantity of units) and the quantity of the hedged
        item that it actually hedges with those 40 units.

B6.4.10 However, the designation of the hedging relationship using the same hedge ratio
        as that resulting from the quantities of the hedged item and the hedging instrument
        that the entity actually uses shall not reflect an imbalance between the weightings
        of the hedged item and the hedging instrument that would in turn create hedge
        ineffectiveness (irrespective of whether recognised or not) that could result in an
        accounting outcome that would be inconsistent with the purpose of hedge
        accounting. Hence, for the purpose of designating a hedging relationship, an entity
        must adjust the hedge ratio that results from the quantities of the hedged item and
        the hedging instrument that the entity actually uses if that is needed to avoid such
        an imbalance.

B6.4.11 Examples of relevant considerations in assessing whether an accounting outcome
        is inconsistent with the purpose of hedge accounting are:

        (a)   whether the intended hedge ratio is established to avoid recognising hedge
              ineffectiveness for cash flow hedges, or to achieve fair value hedge
              adjustments for more hedged items with the aim of increasing the use of fair
              value accounting, but without offsetting fair value changes of the hedging
              instrument; and

        (b)   whether there is a commercial reason for the particular weightings of the
              hedged item and the hedging instrument, even though that creates hedge
              ineffectiveness. For example, an entity enters into and designates a quantity
              of the hedging instrument that is not the quantity that it determined as the
              best hedge of the hedged item because the standard volume of the hedging
              instruments does not allow it to enter into that exact quantity of hedging
              instrument (a `lot size issue'). An example is an entity that hedges 100
              tonnes of coffee purchases with standard coffee futures contracts that have a
              contract size of 37,500 lbs (pounds). The entity could only use either five or
              six contracts (equivalent to 85.0 and 102.1 tonnes respectively) to hedge the
               purchase volume of 100 tonnes. In that case, the entity designates the
               hedging relationship using the hedge ratio that results from the number of
               coffee futures contracts that it actually uses, because the hedge
               ineffectiveness resulting from the mismatch in the weightings of the hedged
               item and the hedging instrument would not result in an accounting outcome
               that is inconsistent with the purpose of hedge accounting.

         Frequency of assessing whether the hedge effectiveness requirements
         are met

B6.4.12 An entity shall assess at the inception of the hedging relationship, and on an
        ongoing basis, whether a hedging relationship meets the hedge effectiveness
        requirements. At a minimum, an entity shall perform the ongoing assessment at
        each reporting date or upon a significant change in the circumstances affecting the
        hedge effectiveness requirements, whichever comes first. The assessment relates
        to expectations about hedge effectiveness and is therefore only forward-looking.

         Methods for assessing whether the hedge effectiveness requirements
         are met

B6.4.13 This Standard does not specify a method for assessing whether a hedging
        relationship meets the hedge effectiveness requirements. However, an entity shall
        use a method that captures the relevant characteristics of the hedging relationship
        including the sources of hedge ineffectiveness. Depending on those factors, the
        method can be a qualitative or a quantitative assessment.

B6.4.14 For example, when the critical terms (such as the nominal amount, maturity and
        underlying) of the hedging instrument and the hedged item match or are closely
        aligned, it might be possible for an entity to conclude on the basis of a qualitative
        assessment of those critical terms that the hedging instrument and the hedged item
        have values that will generally move in the opposite direction because of the same
        risk and hence that an economic relationship exists between the hedged item and
        the hedging instrument (see paragraphs B6.4.4­B6.4.6).

B6.4.15 The fact that a derivative is in or out of the money when it is designated as a
        hedging instrument does not in itself mean that a qualitative assessment is
        inappropriate. It depends on the circumstances whether hedge ineffectiveness
        arising from that fact could have a magnitude that a qualitative assessment would
        not adequately capture.

B6.4.16 Conversely, if the critical terms of the hedging instrument and the hedged item are
        not closely aligned, there is an increased level of uncertainty about the extent of
        offset. Consequently, the hedge effectiveness during the term of the hedging
        relationship is more difficult to predict. In such a situation it might only be
        possible for an entity to conclude on the basis of a quantitative assessment that an
        economic relationship exists between the hedged item and the hedging instrument
        (see paragraphs B6.4.4­B6.4.6). In some situations a quantitative assessment
        might also be needed to assess whether the hedge ratio used for designating the
        hedging relationship meets the hedge effectiveness requirements (see paragraphs
        B6.4.9­B6.4.11). An entity can use the same or different methods for those two
        different purposes.

B6.4.17 If there are changes in circumstances that affect hedge effectiveness, an entity may
        have to change the method for assessing whether a hedging relationship meets the
        hedge effectiveness requirements in order to ensure that the relevant
        characteristics of the hedging relationship, including the sources of hedge
        ineffectiveness, are still captured.

B6.4.18 An entity's risk management is the main source of information to perform the
        assessment of whether a hedging relationship meets the hedge effectiveness
        requirements. This means that the management information (or analysis) used for
        decision-making purposes can be used as a basis for assessing whether a hedging
        relationship meets the hedge effectiveness requirements.

B6.4.19 An entity's documentation of the hedging relationship includes how it will assess
        the hedge effectiveness requirements, including the method or methods used. The
        documentation of the hedging relationship shall be updated for any changes to the
        methods (see paragraph B6.4.17).

        Accounting for qualifying hedging relationships (Section 6.5)

B6.5.1 An example of a fair value hedge is a hedge of exposure to changes in the fair value
        of a fixed-rate debt instrument arising from changes in interest rates. Such a hedge
        could be entered into by the issuer or by the holder.

B6.5.2 The purpose of a cash flow hedge is to defer the gain or loss on the hedging
        instrument to a period or periods in which the hedged expected future cash flows
        affect profit or loss. An example of a cash flow hedge is the use of a swap to
        change floating rate debt (whether measured at amortised cost or fair value) to
        fixed-rate debt (ie a hedge of a future transaction in which the future cash flows
        being hedged are the future interest payments). Conversely, a forecast purchase of
        an equity instrument that, once acquired, will be accounted for at fair value
        through profit or loss, is an example of an item that cannot be the hedged item in a
        cash flow hedge, because any gain or loss on the hedging instrument that would
        be deferred could not be appropriately reclassified to profit or loss during a period
        in which it would achieve offset. For the same reason, a forecast purchase of an
        equity instrument that, once acquired, will be accounted for at fair value with
        changes in fair value presented in other comprehensive income also cannot be the
         hedged item in a cash flow hedge.

B6.5.3 A hedge of a firm commitment (for example, a hedge of the change in fuel price
        relating to an unrecognised contractual commitment by an electric utility to
        purchase fuel at a fixed price) is a hedge of an exposure to a change in fair value.
        Accordingly, such a hedge is a fair value hedge. However, in accordance with
        paragraph 6.5.4, a hedge of the foreign currency risk of a firm commitment could
        alternatively be accounted for as a cash flow hedge.

         Measurement of hedge ineffectiveness

B6.5.4 When measuring hedge ineffectiveness, an entity shall consider the time value of
        money. Consequently, the entity determines the value of the hedged item on a
        present value basis and therefore the change in the value of the hedged item also
        includes the effect of the time value of money.

B6.5.5 To calculate the change in the value of the hedged item for the purpose of
        measuring hedge ineffectiveness, an entity may use a derivative that would have
        terms that match the critical terms of the hedged item (this is commonly referred
        to as a `hypothetical derivative'), and, for example for a hedge of a forecast
        transaction, would be calibrated using the hedged price (or rate) level. For
        example, if the hedge was for a two-sided risk at the current market level, the
        hypothetical derivative would represent a hypothetical forward contract that is
        calibrated to a value of nil at the time of designation of the hedging relationship. If
        the hedge was for example for a one-sided risk, the hypothetical derivative would
        represent the intrinsic value of a hypothetical option that at the time of designation
        of the hedging relationship is at the money if the hedged price level is the current
        market level, or out of the money if the hedged price level is above (or, for a
        hedge of a long position, below) the current market level. Using a hypothetical
        derivative is one possible way of calculating the change in the value of the hedged
        item. The hypothetical derivative replicates the hedged item and hence results in
        the same outcome as if that change in value was determined by a different
        approach. Hence, using a `hypothetical derivative' is not a method in its own right
        but a mathematical expedient that can only be used to calculate the value of the
        hedged item. Consequently, a `hypothetical derivative' cannot be used to include
        features in the value of the hedged item that only exist in the hedging instrument
        (but not in the hedged item). An example is debt denominated in a foreign
        currency (irrespective of whether it is fixed-rate or variable-rate debt). When
        using a hypothetical derivative to calculate the change in the value of such debt or
        the present value of the cumulative change in its cash flows, the hypothetical
        derivative cannot simply impute a charge for exchanging different currencies even
        though actual derivatives under which different currencies are exchanged might
        include such a charge (for example, cross-currency interest rate swaps).
B6.5.6 The change in the value of the hedged item determined using a hypothetical
        derivative may also be used for the purpose of assessing whether a hedging
        relationship meets the hedge effectiveness requirements.

        Rebalancing the hedging relationship and changes to the hedge ratio

B6.5.7 Rebalancing refers to the adjustments made to the designated quantities of the
        hedged item or the hedging instrument of an already existing hedging relationship
        for the purpose of maintaining a hedge ratio that complies with the hedge
        effectiveness requirements. Changes to designated quantities of a hedged item or
        of a hedging instrument for a different purpose do not constitute rebalancing for
        the purpose of this Standard.

B6.5.8 Rebalancing is accounted for as a continuation of the hedging relationship in
        accordance with paragraphs B6.5.9­B6.5.21. On rebalancing, the hedge
        ineffectiveness of the hedging relationship is determined and recognised
        immediately before adjusting the hedging relationship.

B6.5.9 Adjusting the hedge ratio allows an entity to respond to changes in the relationship
        between the hedging instrument and the hedged item that arise from their
        underlyings or risk variables. For example, a hedging relationship in which the
        hedging instrument and the hedged item have different but related underlyings
        changes in response to a change in the relationship between those two underlyings
        (for example, different but related reference indices, rates or prices). Hence,
        rebalancing allows the continuation of a hedging relationship in situations in
        which the relationship between the hedging instrument and the hedged item
        changes in a way that can be compensated for by adjusting the hedge ratio.

B6.5.10 For example, an entity hedges an exposure to Foreign Currency A using a
        currency derivative that references Foreign Currency B and Foreign Currencies A
        and B are pegged (ie their exchange rate is maintained within a band or at an
        exchange rate set by a central bank or other authority). If the exchange rate
        between Foreign Currency A and Foreign Currency B were changed (ie a new
        band or rate was set), rebalancing the hedging relationship to reflect the new
        exchange rate would ensure that the hedging relationship would continue to meet
        the hedge effectiveness requirement for the hedge ratio in the new circumstances.
        In contrast, if there was a default on the currency derivative, changing the hedge
        ratio could not ensure that the hedging relationship would continue to meet that
        hedge effectiveness requirement. Hence, rebalancing does not facilitate the
        continuation of a hedging relationship in situations in which the relationship
        between the hedging instrument and the hedged item changes in a way that cannot
        be compensated for by adjusting the hedge ratio.

B6.5.11 Not every change in the extent of offset between the changes in the fair value of
         the hedging instrument and the hedged item's fair value or cash flows constitutes
         a change in the relationship between the hedging instrument and the hedged item.
         An entity analyses the sources of hedge ineffectiveness that it expected to affect
         the hedging relationship during its term and evaluates whether changes in the
         extent of offset are:

         (a)   fluctuations around the hedge ratio, which remains valid (ie continues to
               appropriately reflect the relationship between the hedging instrument and
               the hedged item); or

         (b)   an indication that the hedge ratio no longer appropriately reflects the
               relationship between the hedging instrument and the hedged item.

         An entity performs this evaluation against the hedge effectiveness requirement for
         the hedge ratio, ie to ensure that the hedging relationship does not reflect an
         imbalance between the weightings of the hedged item and the hedging instrument
         that would create hedge ineffectiveness (irrespective of whether recognised or
         not) that could result in an accounting outcome that would be inconsistent with
         the purpose of hedge accounting. Hence, this evaluation requires judgement.

B6.5.12 Fluctuation around a constant hedge ratio (and hence the related hedge
        ineffectiveness) cannot be reduced by adjusting the hedge ratio in response to
        each particular outcome. Hence, in such circumstances, the change in the extent of
        offset is a matter of measuring and recognising hedge ineffectiveness but does not
        require rebalancing.

B6.5.13 Conversely, if changes in the extent of offset indicate that the fluctuation is around
        a hedge ratio that is different from the hedge ratio that is currently used for that
        hedging relationship, or that there is a trend leading away from that hedge ratio,
        hedge ineffectiveness can be reduced by adjusting the hedge ratio, whereas
        retaining the hedge ratio would increasingly produce hedge ineffectiveness.
        Hence, in such circumstances, an entity must evaluate whether the hedging
        relationship reflects an imbalance between the weightings of the hedged item and
        the hedging instrument that would create hedge ineffectiveness (irrespective of
        whether recognised or not) that could result in an accounting outcome that would
        be inconsistent with the purpose of hedge accounting. If the hedge ratio is
        adjusted, it also affects the measurement and recognition of hedge ineffectiveness
        because, on rebalancing, the hedge ineffectiveness of the hedging relationship
        must be determined and recognised immediately before adjusting the hedging
        relationship in accordance with paragraph B6.5.8.

B6.5.14 Rebalancing means that, for hedge accounting purposes, after the start of a
        hedging relationship an entity adjusts the quantities of the hedging instrument or
        the hedged item in response to changes in circumstances that affect the hedge ratio
        of that hedging relationship. Typically, that adjustment should reflect adjustments
        in the quantities of the hedging instrument and the hedged item that it actually
        uses. However, an entity must adjust the hedge ratio that results from the
        quantities of the hedged item or the hedging instrument that it actually uses if:

        (a)   the hedge ratio that results from changes to the quantities of the hedging
              instrument or the hedged item that the entity actually uses would reflect an
              imbalance that would create hedge ineffectiveness that could result in an
              accounting outcome that would be inconsistent with the purpose of hedge
              accounting; or

        (b)   an entity would retain quantities of the hedging instrument and the hedged
              item that it actually uses, resulting in a hedge ratio that, in new
              circumstances, would reflect an imbalance that would create hedge
              ineffectiveness that could result in an accounting outcome that would be
              inconsistent with the purpose of hedge accounting (ie an entity must not
              create an imbalance by omitting to adjust the hedge ratio).

B6.5.15 Rebalancing does not apply if the risk management objective for a hedging
        relationship has changed. Instead, hedge accounting for that hedging relationship
        shall be discontinued (despite that an entity might designate a new hedging
        relationship that involves the hedging instrument or hedged item of the previous
        hedging relationship as described in paragraph B6.5.28).

B6.5.16 If a hedging relationship is rebalanced, the adjustment to the hedge ratio can be
        effected in different ways:

        (a)   the weighting of the hedged item can be increased (which at the same time
              reduces the weighting of the hedging instrument) by:

              (i)    increasing the volume of the hedged item; or

              (ii)   decreasing the volume of the hedging instrument.

        (b)   the weighting of the hedging instrument can be increased (which at the same
              time reduces the weighting of the hedged item) by:

              (i)    increasing the volume of the hedging instrument; or

              (ii)   decreasing the volume of the hedged item.

        Changes in volume refer to the quantities that are part of the hedging relationship.
        Hence, decreases in volumes do not necessarily mean that the items or
        transactions no longer exist, or are no longer expected to occur, but that they are
        not part of the hedging relationship. For example, decreasing the volume of the
        hedging instrument can result in the entity retaining a derivative, but only part of
        it might remain a hedging instrument of the hedging relationship. This could
        occur if the rebalancing could be effected only by reducing the volume of the
        hedging instrument in the hedging relationship, but with the entity retaining the
        volume that is no longer needed. In that case, the undesignated part of the
        derivative would be accounted for at fair value through profit or loss (unless it
        was designated as a hedging instrument in a different hedging relationship).

B6.5.17 Adjusting the hedge ratio by increasing the volume of the hedged item does not
        affect how the changes in the fair value of the hedging instrument are measured.
        The measurement of the changes in the value of the hedged item related to the
        previously designated volume also remains unaffected. However, from the date of
        rebalancing, the changes in the value of the hedged item also include the change
        in the value of the additional volume of the hedged item. These changes are
        measured starting from, and by reference to, the date of rebalancing instead of the
        date on which the hedging relationship was designated. For example, if an entity
        originally hedged a volume of 100 tonnes of a commodity at a forward price of
        Rs.80 (the forward price at inception of the hedging relationship) and added a
        volume of 10 tonnes on rebalancing when the forward price was Rs.90, the
        hedged item after rebalancing would comprise two layers: 100 tonnes hedged at
        Rs.80 and 10 tonnes hedged at Rs.90.

B6.5.18 Adjusting the hedge ratio by decreasing the volume of the hedging instrument
        does not affect how the changes in the value of the hedged item are measured. The
        measurement of the changes in the fair value of the hedging instrument related to
        the volume that continues to be designated also remains unaffected. However,
        from the date of rebalancing, the volume by which the hedging instrument was
        decreased is no longer part of the hedging relationship. For example, if an entity
        originally hedged the price risk of a commodity using a derivative volume of 100
        tonnes as the hedging instrument and reduces that volume by 10 tonnes on
        rebalancing, a nominal amount of 90 tonnes of the hedging instrument volume
        would remain (see paragraph B6.5.16 for the consequences for the derivative
        volume (ie the 10 tonnes) that is no longer a part of the hedging relationship).

B6.5.19 Adjusting the hedge ratio by increasing the volume of the hedging instrument does
        not affect how the changes in the value of the hedged item are measured. The
        measurement of the changes in the fair value of the hedging instrument related to
        the previously designated volume also remains unaffected. However, from the
        date of rebalancing, the changes in the fair value of the hedging instrument also
        include the changes in the value of the additional volume of the hedging
        instrument. The changes are measured starting from, and by reference to, the date
        of rebalancing instead of the date on which the hedging relationship was
        designated. For example, if an entity originally hedged the price risk of a
        commodity using a derivative volume of 100 tonnes as the hedging instrument
        and added a volume of 10 tonnes on rebalancing, the hedging instrument after
        rebalancing would comprise a total derivative volume of 110 tonnes. The change
        in the fair value of the hedging instrument is the total change in the fair value of
        the derivatives that make up the total volume of 110 tonnes. These derivatives
        could (and probably would) have different critical terms, such as their forward
        rates, because they were entered into at different points in time (including the
        possibility of designating derivatives into hedging relationships after their initial
        recognition).

B6.5.20 Adjusting the hedge ratio by decreasing the volume of the hedged item does not
        affect how the changes in the fair value of the hedging instrument are measured.
        The measurement of the changes in the value of the hedged item related to the
        volume that continues to be designated also remains unaffected. However, from
        the date of rebalancing, the volume by which the hedged item was decreased is no
        longer part of the hedging relationship. For example, if an entity originally hedged
        a volume of 100 tonnes of a commodity at a forward price of Rs.80 and reduces
        that volume by 10 tonnes on rebalancing, the hedged item after rebalancing would
        be 90 tonnes hedged at Rs.80. The 10 tonnes of the hedged item that are no longer
        part of the hedging relationship would be accounted for in accordance with the
        requirements for the discontinuation of hedge accounting (see paragraphs 6.5.6­
        6.5.7 and B6.5.22­B6.5.28).

B6.5.21 When rebalancing a hedging relationship, an entity shall update its analysis of the
        sources of hedge ineffectiveness that are expected to affect the hedging
        relationship during its (remaining) term (see paragraph B6.4.2). The
        documentation of the hedging relationship shall be updated accordingly.

        Discontinuation of hedge accounting

B6.5.22 Discontinuation of hedge accounting applies prospectively from the date on which
        the qualifying criteria are no longer met.

B6.5.23 An entity shall not de-designate and thereby discontinue a hedging relationship
        that:

         (a)   still meets the risk management objective on the basis of which it qualified
               for hedge accounting (ie the entity still pursues that risk management
               objective); and

         (b)   continues to meet all other qualifying criteria (after taking into account any
               rebalancing of the hedging relationship, if applicable).

B6.5.24 For the purposes of this Standard, an entity's risk management strategy is
distinguished from its risk management objectives. The risk management strategy
is established at the highest level at which an entity determines how it manages its
risk. Risk management strategies typically identify the risks to which the entity is
exposed and set out how the entity responds to them. A risk management strategy
is typically in place for a longer period and may include some flexibility to react
to changes in circumstances that occur while that strategy is in place (for example,
different interest rate or commodity price levels that result in a different extent of
hedging). This is normally set out in a general document that is cascaded down
through an entity through policies containing more specific guidelines. In contrast,
the risk management objective for a hedging relationship applies at the level of a
particular hedging relationship. It relates to how the particular hedging instrument
that has been designated is used to hedge the particular exposure that has been
designated as the hedged item. Hence, a risk management strategy can involve
many different hedging relationships whose risk management objectives relate to
executing that overall risk management strategy. For example:

(a)   an entity has a strategy of managing its interest rate exposure on debt
      funding that sets ranges for the overall entity for the mix between variable-
      rate and fixed-rate funding. The strategy is to maintain between 20 per cent
      and 40 per cent of the debt at fixed rates. The entity decides from time to
      time how to execute this strategy (ie where it positions itself within the 20
      per cent to 40 per cent range for fixed-rate interest exposure) depending on
      the level of interest rates. If interest rates are low the entity fixes the interest
      for more debt than when interest rates are high. The entity's debt is Rs.100
      of variable-rate debt of which Rs.30 is swapped into a fixed-rate exposure.
      The entity takes advantage of low interest rates to issue an additional Rs.50
      of debt to finance a major investment, which the entity does by issuing a
      fixed-rate bond. In the light of the low interest rates, the entity decides to set
      its fixed interest-rate exposure to 40 per cent of the total debt by reducing by
      Rs.20 the extent to which it previously hedged its variable-rate exposure,
      resulting in Rs.60 of fixed-rate exposure. In this situation the risk
      management strategy itself remains unchanged. However, in contrast the
      entity's execution of that strategy has changed and this means that, for Rs.20
      of variable-rate exposure that was previously hedged, the risk management
      objective has changed (ie at the hedging relationship level). Consequently,
      in this situation hedge accounting must be discontinued for Rs.20 of the
      previously hedged variable-rate exposure. This could involve reducing the
      swap position by a Rs.20 nominal amount but, depending on the
      circumstances, an entity might retain that swap volume and, for example,
      use it for hedging a different exposure or it might become part of a trading
      book. Conversely, if an entity instead swapped a part of its new fixed-rate
      debt into a variable-rate exposure, hedge accounting would have to be
      continued for its previously hedged variable-rate exposure.
(b)   some exposures result from positions that frequently change, for example,
      the interest rate risk of an open portfolio of debt instruments. The addition
      of new debt instruments and the derecognition of debt instruments
      continuously change that exposure (ie it is different from simply running off
      a position that matures). This is a dynamic process in which both the
      exposure and the hedging instruments used to manage it do not remain the
      same for long. Consequently, an entity with such an exposure frequently
      adjusts the hedging instruments used to manage the interest rate risk as the
      exposure changes. For example, debt instruments with 24 months'
      remaining maturity are designated as the hedged item for interest rate risk
      for 24 months. The same procedure is applied to other time buckets or
      maturity periods. After a short period of time, the entity discontinues all,
      some or a part of the previously designated hedging relationships for
      maturity periods and designates new hedging relationships for maturity
      periods on the basis of their size and the hedging instruments that exist at
      that time. The discontinuation of hedge accounting in this situation reflects
      that those hedging relationships are established in such a way that the entity
      looks at a new hedging instrument and a new hedged item instead of the
      hedging instrument and the hedged item that were designated previously.
      The risk management strategy remains the same, but there is no risk
      management objective that continues for those previously designated
      hedging relationships, which as such no longer exist. In such a situation, the
      discontinuation of hedge accounting applies to the extent to which the risk
      management objective has changed. This depends on the situation of an
      entity and could, for example, affect all or only some hedging relationships
      of a maturity period, or only part of a hedging relationship.

(c)   an entity has a risk management strategy whereby it manages the foreign
      currency risk of forecast sales and the resulting receivables. Within that
      strategy the entity manages the foreign currency risk as a particular hedging
      relationship only up to the point of the recognition of the receivable.
      Thereafter, the entity no longer manages the foreign currency risk on the
      basis of that particular hedging relationship. Instead, it manages together the
      foreign currency risk from receivables, payables and derivatives (that do not
      relate to forecast transactions that are still pending) denominated in the same
      foreign currency. For accounting purposes, this works as a `natural' hedge
      because the gains and losses from the foreign currency risk on all of those
      items are immediately recognised in profit or loss. Consequently, for
      accounting purposes, if the hedging relationship is designated for the period
      up to the payment date, it must be discontinued when the receivable is
      recognised, because the risk management objective of the original hedging
      relationship no longer applies. The foreign currency risk is now managed
      within the same strategy but on a different basis. Conversely, if an entity
      had a different risk management objective and managed the foreign
              currency risk as one continuous hedging relationship specifically for that
              forecast sales amount and the resulting receivable until the settlement date,
              hedge accounting would continue until that date.

B6.5.25 The discontinuation of hedge accounting can affect:

        (a)     a hedging relationship in its entirety; or

        (b)     a part of a hedging relationship (which means that hedge accounting
                continues for the remainder of the hedging relationship).

B6.5.26 A hedging relationship is discontinued in its entirety when, as a whole, it ceases to
        meet the qualifying criteria. For example:

        (a)     the hedging relationship no longer meets the risk management objective on
                the basis of which it qualified for hedge accounting (ie the entity no longer
                pursues that risk management objective);

        (b)     the hedging instrument or instruments have been sold or terminated (in
                relation to the entire volume that was part of the hedging relationship); or

        (c)     there is no longer an economic relationship between the hedged item and
                the hedging instrument or the effect of credit risk starts to dominate the
                value changes that result from that economic relationship.

B6.5.27 A part of a hedging relationship is discontinued (and hedge accounting continues
        for its remainder) when only a part of the hedging relationship ceases to meet the
        qualifying criteria. For example:

        (a)   on rebalancing of the hedging relationship, the hedge ratio might be
              adjusted in such a way that some of the volume of the hedged item is no
              longer part of the hedging relationship (see paragraph B6.5.20); hence,
              hedge accounting is discontinued only for the volume of the hedged item
              that is no longer part of the hedging relationship; or

        (b)   when the occurrence of some of the volume of the hedged item that is (or is
              a component of) a forecast transaction is no longer highly probable, hedge
              accounting is discontinued only for the volume of the hedged item whose
              occurrence is no longer highly probable. However, if an entity has a history
              of having designated hedges of forecast transactions and having
              subsequently determined that the forecast transactions are no longer
              expected to occur, the entity's ability to predict forecast transactions
              accurately is called into question when predicting similar forecast
              transactions. This affects the assessment of whether similar forecast
              transactions are highly probable (see paragraph 6.3.3) and hence whether
              they are eligible as hedged items.

B6.5.28 An entity can designate a new hedging relationship that involves the hedging
        instrument or hedged item of a previous hedging relationship for which hedge
        accounting was (in part or in its entirety) discontinued. This does not constitute a
        continuation of a hedging relationship but is a restart. For example:

        (a)   a hedging instrument experiences such a severe credit deterioration that the
              entity replaces it with a new hedging instrument. This means that the
              original hedging relationship failed to achieve the risk management
              objective and is hence discontinued in its entirety. The new hedging
              instrument is designated as the hedge of the same exposure that was hedged
              previously and forms a new hedging relationship. Hence, the changes in the
              fair value or the cash flows of the hedged item are measured starting from,
              and by reference to, the date of designation of the new hedging relationship
              instead of the date on which the original hedging relationship was
              designated.

        (b)   a hedging relationship is discontinued before the end of its term. The
              hedging instrument in that hedging relationship can be designated as the
              hedging instrument in another hedging relationship (for example, when
              adjusting the hedge ratio on rebalancing by increasing the volume of the
              hedging instrument or when designating a whole new hedging relationship).

        Accounting for the time value of options

B6.5.29 An option can be considered as being related to a time period because its time
        value represents a charge for providing protection for the option holder over a
        period of time. However, the relevant aspect for the purpose of assessing whether
        an option hedges a transaction or time-period related hedged item are the
        characteristics of that hedged item, including how and when it affects profit or
        loss. Hence, an entity shall assess the type of hedged item (see paragraph
        6.5.15(a)) on the basis of the nature of the hedged item (regardless of whether the
        hedging relationship is a cash flow hedge or a fair value hedge):

        (a)   the time value of an option relates to a transaction related hedged item if the
              nature of the hedged item is a transaction for which the time value has the
              character of costs of that transaction. An example is when the time value of
              an option relates to a hedged item that results in the recognition of an item
              whose initial measurement includes transaction costs (for example, an entity
              hedges a commodity purchase, whether it is a forecast transaction or a firm
              commitment, against the commodity price risk and includes the transaction
              costs in the initial measurement of the inventory). As a consequence of
               including the time value of the option in the initial measurement of the
               particular hedged item, the time value affects profit or loss at the same time
               as that hedged item. Similarly, an entity that hedges a sale of a commodity,
               whether it is a forecast transaction or a firm commitment, would include the
               time value of the option as part of the cost related to that sale (hence, the
               time value would be recognised in profit or loss in the same period as the
               revenue from the hedged sale).

         (b)   the time value of an option relates to a time-period related hedged item if the
               nature of the hedged item is such that the time value has the character of a
               cost for obtaining protection against a risk over a particular period of time
               (but the hedged item does not result in a transaction that involves the notion
               of a transaction cost in accordance with (a)). For example, if commodity
               inventory is hedged against a fair value decrease for six months using a
               commodity option with a corresponding life, the time value of the option
               would be allocated to profit or loss (ie amortised on a systematic and
               rational basis) over that six-month period. Another example is a hedge of a
               net investment in a foreign operation that is hedged for 18 months using a
               foreign-exchange option, which would result in allocating the time value of
               the option over that 18-month period.

B6.5.30 The characteristics of the hedged item, including how and when the hedged item
        affects profit or loss, also affect the period over which the time value of an option
        that hedges a time-period related hedged item is amortised, which is consistent
        with the period over which the option's intrinsic value can affect profit or loss in
        accordance with hedge accounting. For example, if an interest rate option (a cap)
        is used to provide protection against increases in the interest expense on a floating
        rate bond, the time value of that cap is amortised to profit or loss over the same
        period over which any intrinsic value of the cap would affect profit or loss:

        (a)    if the cap hedges increases in interest rates for the first three years out of a
               total life of the floating rate bond of five years, the time value of that cap is
               amortised over the first three years; or

        (b)    if the cap is a forward start option that hedges increases in interest rates for
               years two and three out of a total life of the floating rate bond of five years,
               the time value of that cap is amortised during years two and three.

B6.5.31 The accounting for the time value of options in accordance with paragraph 6.5.15
        also applies to a combination of a purchased and a written option (one being a put
        option and one being a call option) that at the date of designation as a hedging
        instrument has a net nil time value (commonly referred to as a `zero-cost collar').
        In that case, an entity shall recognise any changes in time value in other
        comprehensive income, even though the cumulative change in time value over the
         total period of the hedging relationship is nil. Hence, if the time value of the
         option relates to:

         (a)   a transaction related hedged item, the amount of time value at the end of the
               hedging relationship that adjusts the hedged item or that is reclassified to
               profit or loss (see paragraph 6.5.15(b)) would be nil.

         (b)   a time-period related hedged item, the amortisation expense related to the
               time value is nil.

B6.5.32 The accounting for the time value of options in accordance with paragraph 6.5.15
        applies only to the extent that the time value relates to the hedged item (aligned
        time value). The time value of an option relates to the hedged item if the critical
        terms of the option (such as the nominal amount, life and underlying) are aligned
        with the hedged item. Hence, if the critical terms of the option and the hedged
        item are not fully aligned, an entity shall determine the aligned time value, ie how
        much of the time value included in the premium (actual time value) relates to the
        hedged item (and therefore should be treated in accordance with paragraph
        6.5.15). An entity determines the aligned time value using the valuation of the
        option that would have critical terms that perfectly match the hedged item.

B6.5.33 If the actual time value and the aligned time value differ, an entity shall determine
        the amount that is accumulated in a separate component of equity in accordance
        with paragraph 6.5.15 as follows:

         (a)   if, at inception of the hedging relationship, the actual time value is higher
               than the aligned time value, the entity shall:

               (i)    determine the amount that is accumulated in a separate component of
                      equity on the basis of the aligned time value; and

               (ii)   account for the differences in the fair value changes between the two
                      time values in profit or loss.

         (b)   if, at inception of the hedging relationship, the actual time value is lower
               than the aligned time value, the entity shall determine the amount that is
               accumulated in a separate component of equity by reference to the lower of
               the cumulative change in fair value of:

               (i)    the actual time value; and

               (ii)   the aligned time value.

         Any remainder of the change in fair value of the actual time value shall be
        recognised in profit or loss.

        Accounting for the forward element of forward contracts and foreign
        currency basis spreads of financial instruments

B6.5.34 A forward contract can be considered as being related to a time period because its
        forward element represents charges for a period of time (which is the tenor for
        which it is determined). However, the relevant aspect for the purpose of assessing
        whether a hedging instrument hedges a transaction or time-period related hedged
        item are the characteristics of that hedged item, including how and when it affects
        profit or loss. Hence, an entity shall assess the type of hedged item (see
        paragraphs 6.5.16 and 6.5.15(a)) on the basis of the nature of the hedged item
        (regardless of whether the hedging relationship is a cash flow hedge or a fair value
        hedge):

         (a)   the forward element of a forward contract relates to a transaction related
               hedged item if the nature of the hedged item is a transaction for which the
               forward element has the character of costs of that transaction. An example is
               when the forward element relates to a hedged item that results in the
               recognition of an item whose initial measurement includes transaction costs
               (for example, an entity hedges an inventory purchase denominated in a
               foreign currency, whether it is a forecast transaction or a firm commitment,
               against foreign currency risk and includes the transaction costs in the initial
               measurement of the inventory). As a consequence of including the forward
               element in the initial measurement of the particular hedged item, the
               forward element affects profit or loss at the same time as that hedged item.
               Similarly, an entity that hedges a sale of a commodity denominated in a
               foreign currency against foreign currency risk, whether it is a forecast
               transaction or a firm commitment, would include the forward element as
               part of the cost that is related to that sale (hence, the forward element would
               be recognised in profit or loss in the same period as the revenue from the
               hedged sale).

         (b)   the forward element of a forward contract relates to a time-period related
               hedged item if the nature of the hedged item is such that the forward
               element has the character of a cost for obtaining protection against a risk
               over a particular period of time (but the hedged item does not result in a
               transaction that involves the notion of a transaction cost in accordance with
               (a)). For example, if commodity inventory is hedged against changes in fair
               value for six months using a commodity forward contract with a
               corresponding life, the forward element of the forward contract would be
               allocated to profit or loss (ie amortised on a systematic and rational basis)
               over that six-month period. Another example is a hedge of a net investment
              in a foreign operation that is hedged for 18 months using a foreign-exchange
              forward contract, which would result in allocating the forward element of
              the forward contract over that 18-month period.

B6.5.35 The characteristics of the hedged item, including how and when the hedged item
        affects profit or loss, also affect the period over which the forward element of a
        forward contract that hedges a time-period related hedged item is amortised,
        which is over the period to which the forward element relates. For example, if a
        forward contract hedges the exposure to variability in three-month interest rates
        for a three-month period that starts in six months' time, the forward element is
        amortised during the period that spans months seven to nine.

B6.5.36 The accounting for the forward element of a forward contract in accordance with
        paragraph 6.5.16 also applies if, at the date on which the forward contract is
        designated as a hedging instrument, the forward element is nil. In that case, an
        entity shall recognise any fair value changes attributable to the forward element in
        other comprehensive income, even though the cumulative fair value change
        attributable to the forward element over the total period of the hedging
        relationship is nil. Hence, if the forward element of a forward contract relates to:

        (a)   a transaction related hedged item, the amount in respect of the forward
              element at the end of the hedging relationship that adjusts the hedged item
              or that is reclassified to profit or loss (see paragraphs 6.5.15(b) and 6.5.16)
              would be nil.

        (b)   a time-period related hedged item, the amortisation amount related to the
              forward element is nil.

B6.5.37 The accounting for the forward element of forward contracts in accordance with
        paragraph 6.5.16 applies only to the extent that the forward element relates to the
        hedged item (aligned forward element). The forward element of a forward
        contract relates to the hedged item if the critical terms of the forward contract
        (such as the nominal amount, life and underlying) are aligned with the hedged
        item. Hence, if the critical terms of the forward contract and the hedged item are
        not fully aligned, an entity shall determine the aligned forward element, ie how
        much of the forward element included in the forward contract (actual forward
        element) relates to the hedged item (and therefore should be treated in accordance
        with paragraph 6.5.16). An entity determines the aligned forward element using
        the valuation of the forward contract that would have critical terms that perfectly
        match the hedged item.

B6.5.38 If the actual forward element and the aligned forward element differ, an entity
        shall determine the amount that is accumulated in a separate component of equity
        in accordance with paragraph 6.5.16 as follows:
        (a)   if, at inception of the hedging relationship, the absolute amount of the actual
              forward element is higher than that of the aligned forward element the entity
              shall:

              (i)    determine the amount that is accumulated in a separate component of
                     equity on the basis of the aligned forward element; and

              (ii)   account for the differences in the fair value changes between the two
                     forward elements in profit or loss.

        (b)   if, at inception of the hedging relationship, the absolute amount of the actual
              forward element is lower than that of the aligned forward element, the entity
              shall determine the amount that is accumulated in a separate component of
              equity by reference to the lower of the cumulative change in fair value of:

              (i)    the absolute amount of the actual forward element; and

              (ii)   the absolute amount of the aligned forward element.

        Any remainder of the change in fair value of the actual forward element shall be
        recognised in profit or loss.

B6.5.39 When an entity separates the foreign currency basis spread from a financial
        instrument and excludes it from the designation of that financial instrument as the
        hedging instrument (see paragraph 6.2.4(b)), the application guidance in
        paragraphs B6.5.34­B6.5.38 applies to the foreign currency basis spread in the
        same manner as it is applied to the forward element of a forward contract.

        Hedge of a group of items (Section 6.6)

        Hedge of a net position

        Eligibility for hedge accounting and designation of a net position

B6.6.1 A net position is eligible for hedge accounting only if an entity hedges on a net
       basis for risk management purposes. Whether an entity hedges in this way is a
       matter of fact (not merely of assertion or documentation). Hence, an entity cannot
       apply hedge accounting on a net basis solely to achieve a particular accounting
       outcome if that would not reflect its risk management approach. Net position
       hedging must form part of an established risk management strategy. Normally this
       would be approved by key management personnel as defined in Ind AS 24.

B6.6.2 For example, Entity A, whose functional currency is its local currency, has a firm
        commitment to pay FC150,000 for advertising expenses in nine months' time and
        a firm commitment to sell finished goods for FC150,000 in 15 months' time.
        Entity A enters into a foreign currency derivative that settles in nine months' time
        under which it receives FC100 and pays Rs.70. Entity A has no other exposures to
        FC. Entity A does not manage foreign currency risk on a net basis. Hence, Entity
        A cannot apply hedge accounting for a hedging relationship between the foreign
        currency derivative and a net position of FC100 (consisting of FC150,000 of the
        firm purchase commitment--ie advertising services--and FC149,900 (of the
        FC150,000) of the firm sale commitment) for a nine-month period.

B6.6.3 If Entity A did manage foreign currency risk on a net basis and did not enter into
       the foreign currency derivative (because it increases its foreign currency risk
       exposure instead of reducing it), then the entity would be in a natural hedged
       position for nine months. Normally, this hedged position would not be reflected in
       the financial statements because the transactions are recognised in different
       reporting periods in the future. The nil net position would be eligible for hedge
       accounting only if the conditions in paragraph 6.6.6 are met.

B6.6.4 When a group of items that constitute a net position is designated as a hedged
       item, an entity shall designate the overall group of items that includes the items
       that can make up the net position. An entity is not permitted to designate a non-
       specific abstract amount of a net position. For example, an entity has a group of
       firm sale commitments in nine months' time for FC100 and a group of firm
       purchase commitments in 18 months' time for FC120. The entity cannot designate
       an abstract amount of a net position up to FC20. Instead, it must designate a gross
       amount of purchases and a gross amount of sales that together give rise to the
       hedged net position. An entity shall designate gross positions that give rise to the
       net position so that the entity is able to comply with the requirements for the
       accounting for qualifying hedging relationships.

        Application of the hedge effectiveness requirements to a hedge of a net position

B6.6.5 When an entity determines whether the hedge effectiveness requirements of
       paragraph 6.4.1(c) are met when it hedges a net position, it shall consider the
       changes in the value of the items in the net position that have a similar effect as
       the hedging instrument in conjunction with the fair value change on the hedging
       instrument. For example, an entity has a group of firm sale commitments in nine
       months' time for FC100 and a group of firm purchase commitments in 18 months'
       time for FC120. It hedges the foreign currency risk of the net position of FC20
       using a forward exchange contract for FC20. When determining whether the
       hedge effectiveness requirements of paragraph 6.4.1(c) are met, the entity shall
       consider the relationship between:

        (a)   the fair value change on the forward exchange contract together with the
               foreign currency risk related changes in the value of the firm sale
               commitments; and

         (b)   the foreign currency risk related changes in the value of the firm purchase
               commitments.

B6.6.6 Similarly, if in the example in paragraph B6.6.5 the entity had a nil net position it
        would consider the relationship between the foreign currency risk related changes
        in the value of the firm sale commitments and the foreign currency risk related
        changes in the value of the firm purchase commitments when determining
        whether the hedge effectiveness requirements of paragraph 6.4.1(c) are met.

         Cash flow hedges that constitute a net position

B6.6.7 When an entity hedges a group of items with offsetting risk positions (ie a net
        position), the eligibility for hedge accounting depends on the type of hedge. If the
        hedge is a fair value hedge, then the net position may be eligible as a hedged item.
        If, however, the hedge is a cash flow hedge, then the net position can only be
        eligible as a hedged item if it is a hedge of foreign currency risk and the
        designation of that net position specifies the reporting period in which the forecast
        transactions are expected to affect profit or loss and also specifies their nature and
        volume.

B6.6.8 For example, an entity has a net position that consists of a bottom layer of FC100 of
        sales and a bottom layer of FC150 of purchases. Both sales and purchases are
        denominated in the same foreign currency. In order to sufficiently specify the
        designation of the hedged net position, the entity specifies in the original
        documentation of the hedging relationship that sales can be of Product A or
        Product B and purchases can be of Machinery Type A, Machinery Type B and
        Raw Material A. The entity also specifies the volumes of the transactions by each
        nature. The entity documents that the bottom layer of sales (FC100) is made up of
        a forecast sales volume of the first FC70 of Product A and the first FC30 of
        Product B. If those sales volumes are expected to affect profit or loss in different
        reporting periods, the entity would include that in the documentation, for example,
        the first FC70 from sales of Product A that are expected to affect profit or loss in
        the first reporting period and the first FC30 from sales of Product B that are
        expected to affect profit or loss in the second reporting period. The entity also
        documents that the bottom layer of the purchases (FC150) is made up of
        purchases of the first FC60 of Machinery Type A, the first FC40 of Machinery
        Type B and the first FC50 of Raw Material A. If those purchase volumes are
        expected to affect profit or loss in different reporting periods, the entity would
        include in the documentation a disaggregation of the purchase volumes by the
        reporting periods in which they are expected to affect profit or loss (similarly to
        how it documents the sales volumes). For example, the forecast transaction would
        be specified as:

        (a)   the first FC60 of purchases of Machinery Type A that are expected to affect
              profit or loss from the third reporting period over the next ten reporting
              periods;

        (b)   the first FC40 of purchases of Machinery Type B that are expected to affect
              profit or loss from the fourth reporting period over the next 20 reporting
              periods; and

        (c)   the first FC50 of purchases of Raw Material A that are expected to be
              received in the third reporting period and sold, ie affect profit or loss, in that
              and the next reporting period.

        Specifying the nature of the forecast transaction volumes would include aspects
        such as the depreciation pattern for items of property, plant and equipment of the
        same kind, if the nature of those items is such that the depreciation pattern could
        vary depending on how the entity uses those items. For example, if the entity uses
        items of Machinery Type A in two different production processes that result in
        straight-line depreciation over ten reporting periods and the units of production
        method respectively, its documentation of the forecast purchase volume for
        Machinery Type A would disaggregate that volume by which of those
        depreciation patterns will apply.

B6.6.9 For a cash flow hedge of a net position, the amounts determined in accordance with
        paragraph 6.5.11 shall include the changes in the value of the items in the net
        position that have a similar effect as the hedging instrument in conjunction with
        the fair value change on the hedging instrument. However, the changes in the
        value of the items in the net position that have a similar effect as the hedging
        instrument are recognised only once the transactions that they relate to are
        recognised, such as when a forecast sale is recognised as revenue. For example, an
        entity has a group of highly probable forecast sales in nine months' time for
        FC100 and a group of highly probable forecast purchases in 18 months' time for
        FC120. It hedges the foreign currency risk of the net position of FC20 using a
        forward exchange contract for FC20. When determining the amounts that are
        recognised in the cash flow hedge reserve in accordance with paragraph
        6.5.11(a)­6.5.11(b), the entity compares:

        (a)   the fair value change on the forward exchange contract together with the
              foreign currency risk related changes in the value of the highly probable
              forecast sales; with

        (b)   the foreign currency risk related changes in the value of the highly probable
              forecast purchases.
         However, the entity recognises only amounts related to the forward exchange
         contract until the highly probable forecast sales transactions are recognised in the
         financial statements, at which time the gains or losses on those forecast
         transactions are recognised (ie the change in the value attributable to the change in
         the foreign exchange rate between the designation of the hedging relationship and
         the recognition of revenue).

B6.6.10 Similarly, if in the example the entity had a nil net position it would compare the
        foreign currency risk related changes in the value of the highly probable forecast
        sales with the foreign currency risk related changes in the value of the highly
        probable forecast purchases. However, those amounts are recognised only once
        the related forecast transactions are recognised in the financial statements.




         Layers of groups of items designated as the hedged item

B6.6.11 For the same reasons noted in paragraph B6.3.19, designating layer components of
        groups of existing items requires the specific identification of the nominal amount
        of the group of items from which the hedged layer component is defined.

B6.6.12 A hedging relationship can include layers from several different groups of items.
        For example, in a hedge of a net position of a group of assets and a group of
        liabilities, the hedging relationship can comprise, in combination, a layer
        component of the group of assets and a layer component of the group of liabilities.

         Presentation of hedging instrument gains or losses

B6.6.13 If items are hedged together as a group in a cash flow hedge, they might affect
        different line items in the statement of profit and loss . The presentation of
        hedging gains or losses in that statement depends on the group of items.

B6.6.14 If the group of items does not have any offsetting risk positions (for example, a
        group of foreign currency expenses that affect different line items in the statement
        of profit and loss that are hedged for foreign currency risk) then the reclassified
        hedging instrument gains or losses shall be apportioned to the line items affected
        by the hedged items. This apportionment shall be done on a systematic and
        rational basis and shall not result in the grossing up of the net gains or losses
        arising from a single hedging instrument.

B6.6.15 If the group of items does have offsetting risk positions (for example, a group of
        sales and expenses denominated in a foreign currency hedged together for foreign
        currency risk) then an entity shall present the hedging gains or losses in a separate
         line item in the statement of profit and loss.Consider, for example, a hedge of the
         foreign currency risk of a net position of foreign currency sales of FC100 and
         foreign currency expenses of FC80 using a forward exchange contract for FC20.
         The gain or loss on the forward exchange contract that is reclassified from the
         cash flow hedge reserve to profit or loss (when the net position affects profit or
         loss) shall be presented in a separate line item from the hedged sales and
         expenses. Moreover, if the sales occur in an earlier period than the expenses, the
         sales revenue is still measured at the spot exchange rate in accordance with Ind
         AS 21. The related hedging gain or loss is presented in a separate line item, so that
         profit or loss reflects the effect of hedging the net position, with a corresponding
         adjustment to the cash flow hedge reserve. When the hedged expenses affect
         profit or loss in a later period, the hedging gain or loss previously recognised in
         the cash flow hedge reserve on the sales is reclassified to profit or loss and
         presented as a separate line item from those that include the hedged expenses,
         which are measured at the spot exchange rate in accordance with Ind AS 21.

B6.6.16 For some types of fair value hedges, the objective of the hedge is not primarily to
        offset the fair value change of the hedged item but instead to transform the cash
        flows of the hedged item. For example, an entity hedges the fair value interest rate
        risk of a fixed-rate debt instrument using an interest rate swap. The entity's hedge
        objective is to transform the fixed-interest cash flows into floating interest cash
        flows. This objective is reflected in the accounting for the hedging relationship by
        accruing the net interest accrual on the interest rate swap in profit or loss. In the
        case of a hedge of a net position (for example, a net position of a fixed-rate asset
        and a fixed-rate liability), this net interest accrual must be presented in a separate
        line item in the statement of profit and loss. This is to avoid the grossing up of a
        single instrument's net gains or losses into offsetting gross amounts and
        recognising them in different line items (for example, this avoids grossing up a net
        interest receipt on a single interest rate swap into gross interest revenue and gross
        interest expense).

         Effective date and transition (Chapter 7)

         Transition (Section 7.2)

         Financial assets held for trading

B7.2.1 At the date of initial application of this Standard, an entity must determine
       whether the objective of the entity's business model for managing any of its
       financial assets meets the condition in paragraph 4.1.2(a) or the condition in
       paragraph 4.1.2A(a) or if a financial asset is eligible for the election in paragraph
       5.7.5. For that purpose, an entity shall determine whether financial assets meet the
       definition of held for trading as if the entity had purchased the assets at the date of
       initial application.
        Impairment

B7.2.2 On transition, an entity should seek to approximate the credit risk on initial
       recognition by considering all reasonable and supportable information that is
       available without undue cost or effort. An entity is not required to undertake an
       exhaustive search for information when determining, at the date of transition,
       whether there have been significant increases in credit risk since initial
       recognition. If an entity is unable to make this determination without undue cost
       or effort paragraph 7.2.20 applies.

B7.2.3 In order to determine the loss allowance on financial instruments initially
       recognised (or loan commitments or financial guarantee contracts to which the
       entity became a party to the contract) prior to the date of initial application, both
       on transition and until the derecognition of those items an entity shall consider
       information that is relevant in determining or approximating the credit risk at
       initial recognition. In order to determine or approximate the initial credit risk, an
       entity may consider internal and external information, including portfolio
       information, in accordance with paragraphs B5.5.1­B5.5.6.

B7.2.4 An entity with little historical information may use information from internal
       reports and statistics (that may have been generated when deciding whether to
       launch a new product), information about similar products or peer group
       experience for comparable financial instruments, if relevant.

        Definitions (Appendix A)

                 Derivatives

BA.1    Typical examples of derivatives are futures and forward, swap and option
        contracts. A derivative usually has a notional amount, which is an amount of
        currency, a number of shares, a number of units of weight or volume or other units
        specified in the contract. However, a derivative instrument does not require the
        holder or writer to invest or receive the notional amount at the inception of the
        contract. Alternatively, a derivative could require a fixed payment or payment of
        an amount that can change (but not proportionally with a change in the
        underlying) as a result of some future event that is unrelated to a notional amount.
        For example, a contract may require a fixed payment of Rs.1,000 if six-month
        LIBOR increases by 100 basis points. Such a contract is a derivative even though
        a notional amount is not specified.

BA.2    The definition of a derivative in this Standard includes contracts that are settled
        gross by delivery of the underlying item (eg a forward contract to purchase a fixed
        rate debt instrument). An entity may have a contract to buy or sell a non-financial
       item that can be settled net in cash or another financial instrument or by
       exchanging financial instruments (eg a contract to buy or sell a commodity at a
       fixed price at a future date). Such a contract is within the scope of this Standard
       unless it was entered into and continues to be held for the purpose of delivery of a
       non-financial item in accordance with the entity's expected purchase, sale or
       usage requirements. However, this Standard applies to such contracts for an
       entity's expected purchase, sale or usage requirements if the entity makes a
       designation in accordance with paragraph 2.5 (see paragraphs 2.4­2.7).

BA.3   One of the defining characteristics of a derivative is that it has an initial net
       investment that is smaller than would be required for other types of contracts that
       would be expected to have a similar response to changes in market factors. An
       option contract meets that definition because the premium is less than the
       investment that would be required to obtain the underlying financial instrument to
       which the option is linked. A currency swap that requires an initial exchange of
       different currencies of equal fair values meets the definition because it has a zero
       initial net investment.

BA.4   A regular way purchase or sale gives rise to a fixed price commitment between
       trade date and settlement date that meets the definition of a derivative. However,
       because of the short duration of the commitment it is not recognised as a
       derivative financial instrument. Instead, this Standard provides for special
       accounting for such regular way contracts (see paragraphs 3.1.2 and B3.1.3­
       B3.1.6).

BA.5   The definition of a derivative refers to non-financial variables that are not specific
       to a party to the contract. These include an index of earthquake losses in a
       particular region and an index of temperatures in a particular city. Non-financial
       variables specific to a party to the contract include the occurrence or non-
       occurrence of a fire that damages or destroys an asset of a party to the contract. A
       change in the fair value of a non-financial asset is specific to the owner if the fair
       value reflects not only changes in market prices for such assets (a financial
       variable) but also the condition of the specific non-financial asset held (a non-
       financial variable). For example, if a guarantee of the residual value of a specific
       car exposes the guarantor to the risk of changes in the car's physical condition, the
       change in that residual value is specific to the owner of the car.

       Financial assets and liabilities held for trading

BA.6   Trading generally reflects active and frequent buying and selling, and financial
       instruments held for trading generally are used with the objective of generating a
       profit from short-term fluctuations in price or dealer's margin.

BA.7   Financial liabilities held for trading include:
       (a)    derivative liabilities that are not accounted for as hedging instruments;
       (b)    obligations to deliver financial assets borrowed by a short seller (ie an
              entity that sells financial assets it has borrowed and does not yet own);
       (c)    financial liabilities that are incurred with an intention to repurchase them
              in the near term (eg a quoted debt instrument that the issuer may buy back
              in the near term depending on changes in its fair value); and
       (d)    financial liabilities that are part of a portfolio of identified financial
              instruments that are managed together and for which there is evidence of a
              recent pattern of short-term profit-taking.

BA.8   The fact that a liability is used to fund trading activities does not in itself make
       that liability one that is held for trading.
     Appendix C
     Amendments to other Standards


     Ind AS 101 First-time Adoption of International Financial Reporting
     Standards


     Ind AS 101, First-time Adoption of Indian Accounting Standards is being revised
     and finalised by the Accounting Standards Board of the Institute of Chartered
     Accountants of India. Amendments consequential to issuance of this Ind AS. i.e.,
     Ind AS 109 Financial Instruments will be incorporated in the Exposure Draft of
     revised Ind AS 101.

C1   Deleted [Refer Appendix 1]

C2   Deleted [Refer Appendix 1]

C3   Deleted [Refer Appendix 1]

C4   Deleted [Refer Appendix 1]

     Ind AS 102 Share-based Payment

C5   Paragraph 6 is amended to read as follows

     6      This Ind AS does not apply to share-based payment transactions in which
            the entity receives or acquires goods or services under a contract within
            the scope of paragraphs 8­10 of Ind AS 32 Financial Instruments:
            Presentation or paragraphs 2.4­2.7 of Ind AS 109 Financial Instruments.




     Ind AS 103 Business Combinations

C6   Paragraphs 16, 42, 53, 56 and 58 are amended to read as follows

     16     In some situations, Ind ASs provide for different accounting depending on
            how an entity classifies or designates a particular asset or liability.
            Examples of classifications or designations that the acquirer shall make on
            the basis of the pertinent conditions as they exist at the acquisition date
            include but are not limited to:
     (a)    classification of particular financial assets and liabilities as
            measured at fair value through profit or loss or at amortised cost, or
            as a financial asset measured at fair value through other
            comprehensive income in accordance with Ind AS 109 Financial
            Instruments;

     (b)    designation of a derivative instrument as a hedging instrument in
            accordance with Ind AS 109; and

     (c)    assessment of whether an embedded derivative should be separated
            from a host contract in accordance with Ind AS 109 (which is a
            matter of `classification' as this Ind AS uses that term).

42   In a business combination achieved in stages, the acquirer shall remeasure
     its previously held equity interest in the acquiree at its acquisition-date fair
     value and recognise the resulting gain or loss, if any, in profit or loss or
     other comprehensive income, as appropriate. In prior reporting periods, the
     acquirer may have recognised changes in the value of its equity interest in
     the acquiree in other comprehensive income. If so, the amount that was
     recognised in other comprehensive income shall be recognised on the same
     basis as would be required if the acquirer had disposed directly of the
     previously held equity interest.

53   Acquisition-related costs are costs the acquirer incurs to effect a business
     combination. Those costs include finder's fees; advisory, legal,
     accounting, valuation and other professional or consulting fees; general
     administrative costs, including the costs of maintaining an internal
     acquisitions department; and costs of registering and issuing debt and
     equity securities. The acquirer shall account for acquisition-related costs as
     expenses in the periods in which the costs are incurred and the services are
     received, with one exception. The costs to issue debt or equity securities
     shall be recognised in accordance with Ind AS 32 and Ind AS 109.

56   After initial recognition and until the liability is settled, cancelled or
     expires, the acquirer shall measure a contingent liability recognised in a
     business combination at the higher of:

     (a)    the amount that would be recognised in accordance with Ind AS
            37; and

     (b)    the amount initially recognised less, if appropriate, the cumulative
            amount of income recognised in accordance with the principles of
            Ind AS 115 Revenue from Contracts with Customers.
            This requirement does not apply to contracts accounted for in accordance
            with Ind AS 109.

     58     Some changes in the fair value of contingent consideration that the
            acquirer recognises after the acquisition date may be the result of
            additional information that the acquirer obtained after that date about facts
            and circumstances that existed at the acquisition date. Such changes are
            measurement period adjustments in accordance with paragraphs 45­49.
            However, changes resulting from events after the acquisition date, such as
            meeting an earnings target, reaching a specified share price or reaching a
            milestone on a research and development project, are not measurement
            period adjustments. The acquirer shall account for changes in the fair value
            of contingent consideration that are not measurement period adjustments
            as follows:

            (a)    ...

            (b)    Other contingent consideration that:

                  (i)    is within the scope of Ind AS 109 shall be measured at fair
                               value at each reporting date and changes in fair value
                               shall be recognised in profit or loss in accordance with
                               Ind AS 109.

                  (ii)   is not within the scope of Ind AS 109 shall be measured at
                               fair value at each reporting date and changes in fair
                               value shall be recognised in profit or loss.


C7   In Appendix B, paragraph B41 is amended to read as follows:

     B41     The acquirer shall not recognise a separate valuation allowance as of the
             acquisition date for assets acquired in a business combination that are
             measured at their acquisition-date fair values because the effects of
             uncertainty about future cash flows are included in the fair value
             measure. For example, because this Ind AS requires the acquirer to
             measure acquired receivables, including loans, at their acquisition-date
             fair values in accounting for a business combination, the acquirer does
             not recognise a separate valuation allowance for the contractual cash
             flows that are deemed to be uncollectible at that date or a loss allowance
             for expected credit losses.

     Ind AS 104 Insurance Contracts
C8   Deleted [Refer Appendix 1]

C9       Paragraphs 3, 4, 7, 8, 12, 34 and 35 are amended to read as follows:

          3    This Ind AS does not address other aspects of accounting by insurers,
               such as accounting for financial assets held by insurers and financial
          liabilities issued by insurers (see Ind AS 32 Financial Instruments: Presentation,
          Ind AS 107 and Ind AS 109 Financial Instruments).

          4    An entity shall not apply this Ind AS to:

               (a)

               (d)    financial guarantee contracts unless the issuer has previously
                      asserted explicitly that it regards such contracts as insurance
                      contracts and has used accounting applicable to insurance
                      contracts, in which case the issuer may elect to apply either Ind AS
                      32, Ind AS 107 and Ind AS 109 or this Ind AS to such financial
                      guarantee contracts. The issuer may make that election contract by
                      contract, but the election for each contract is irrevocable.

               (e)    ...

          7    Ind AS 109 requires an entity to separate some embedded derivatives from
               their host contract, measure them at fair value and include changes in their
               fair value in profit or loss. Ind AS 109 applies to derivatives embedded in
               an insurance contract unless the embedded derivative is itself an insurance
               contract.

     8        As an exception to the requirements in Ind AS 109, an insurer need not
              separate, and measure at fair value, a policyholder's option to surrender an
              insurance contract for a fixed amount (or for an amount based on a fixed
              amount and an interest rate), even if the exercise price differs from the
              carrying amount of the host insurance liability. However, the requirements
              in Ind AS 109 do apply to a put option or cash surrender option embedded
              in an insurance contract if the surrender value varies in response to the
              change in a financial variable (such as an equity or commodity price or
              index), or a non-financial variable that is not specific to a party to the
              contract. Furthermore, those requirements also apply if the holder's ability
              to exercise a put option or cash surrender option is triggered by a change in
              such a variable (for example, a put option that can be exercised if a stock
              market index reaches a specified level).

     12       To unbundle a contract, an insurer shall:
      (a)   apply this Ind AS to the insurance component.

      (b)   apply Ind AS 109 to the deposit component.

34    Some insurance contracts contain a discretionary participation feature as
      well as a guaranteed element. The issuer of such a contract:

      (a)   ...

      (d)   shall, if the contract contains an embedded derivative within the scope
            of Ind AS 109, apply Ind AS 109 to that embedded derivative.

      (e)   ...

Discretionary participation features in financial instruments

35    The requirements in paragraph 34 also apply to a financial instrument that
      contains a discretionary participation feature. In addition:

      (a)   if the issuer classifies the entire discretionary participation feature as a
            liability, it shall apply the liability adequacy test in paragraphs 15­19
            to the whole contract (ie both the guaranteed element and the
            discretionary participation feature). The issuer need not determine the
            amount that would result from applying Ind AS 109 to the guaranteed
            element.

      (b)   if the issuer classifies part or all of that feature as a separate
            component of equity, the liability recognised for the whole contract
            shall not be less than the amount that would result from applying Ind
            AS 109 to the guaranteed element. That amount shall include the
            intrinsic value of an option to surrender the contract, but need not
            include its time value if paragraph 9 exempts that option from
            measurement at fair value. The issuer need not disclose the amount
            that would result from applying Ind AS 109 to the guaranteed
            element, nor need it present that amount separately. Furthermore, the
            issuer need not determine that amount if the total liability recognised
            is clearly higher.

      (c)   ...


C10     In Appendix A the defined term `deposit component' is amended to read
        as follows:
      deposit component A contractual component that is not accounted for
                        as a derivative under Ind AS 109 and would be
                        within the scope of Ind AS 109 if it were a separate
                        instrument.

C11   In Appendix B, paragraphs B18­B20 are amended to read as follows:

      B18 The following are examples of contracts that are insurance
          contracts, if the transfer of insurance risk is significant:

           (a)   ...

           (g)   credit insurance that provides for specified payments to be
                 made to reimburse the holder for a loss it incurs because a
                 specified debtor fails to make payment when due under the
                 original or modified terms of a debt instrument. These
                 contracts could have various legal forms, such as that of a
                 guarantee, some types of letter of credit, a credit derivative
                 default contract or an insurance contract. However, although
                 these contracts meet the definition of an insurance contract,
                 they also meet the definition of a financial guarantee contract
                 in Ind AS 109 and are within the scope of Ind AS 107 and
                 Ind AS 109, not this Ind AS (see paragraph 4(d)).
                 Nevertheless, if an issuer of financial guarantee contracts has
                 previously asserted explicitly that it regards such contracts as
                 insurance contracts and has used accounting applicable to
                 insurance contracts, the issuer may elect to apply either Ind
                 AS 107 and Ind AS 109 or this Ind AS to such financial
                 guarantee contracts.

           (h)   ...

      B19 The following are examples of items that are not insurance
      contracts:

           (a)   ...

           (e)   derivatives that expose one party to financial risk but not
                 insurance risk, because they require that party to make
                 payment based solely on changes in one or more of a
                 specified interest rate, financial instrument price, commodity
                 price, foreign exchange rate, index of prices or rates, credit
                 rating or credit index or other variable, provided in the case
                            of a non-financial variable that the variable is not specific to
                            a party to the contract (see Ind AS 109).

                      (f)   a credit-related guarantee (or letter of credit, credit derivative
                            default contract or credit insurance contract) that requires
                            payments even if the holder has not incurred a loss on the
                            failure of the debtor to make payments when due (see Ind AS
                            109).

                      (g)   ...

               B20 If the contracts described in paragraph B19 create financial assets
                   or financial liabilities, they are within the scope of Ind AS 109.
                   Among other things, this means that the parties to the contract use
                   what is sometimes called deposit accounting, which involves the
                   following:

                      (a)   ...

      Ind AS 105 Non-current Assets Held for Sale and Discontinued
      Operations

      C12      Paragraph 5 is amended to read as follows:

               5      The measurement provisions of this Ind AS*5 do not apply to the
                      following assets, which are covered by the Ind ASs listed, either as
                      individual assets or as part of a disposal group:

                      (a)   ...

                      (c)   financial assets within the scope of Ind AS 109 Financial
                            Instruments.

                      (d)   ...


      Ind AS 107 Financial Instruments: Disclosures

C13   In the rubric, the reference to `Appendices A­D' is amended to `Appendices A­
      C'. Paragraphs 2­5, 8­11, 14, 20, 28­30, 36 and 42C­42E are amended to read as
      follows, paragraphs 12, 12A, 16, 22, 23, 24, 37 are deleted and several headings
                                                                  
      *
        Other than paragraphs 18 and 19, which require the assets in question to be measured in
      accordance with other applicable Accounting Standards 
and paragraphs 5A, 10A, 11A, 11B, 12B­12D, 16A, 20A, 21A­21D, 22A­22C,
23A­23F, 24A­24G and 35A­35N are added.

2    The principles in this Ind AS complement the principles for recognising,
     measuring and presenting financial assets and financial liabilities in Ind AS
     32 Financial Instruments: Presentation and Ind AS 109 Financial
     Instruments.

     Scope

3    This Ind AS shall be applied by all entities to all types of financial
     instruments, except:

     (a)   those interests in subsidiaries, associates or joint ventures that are
           accounted for in accordance with Ind AS 110 Consolidated Financial
           Statements, Ind AS 27 Separate Financial Statements or Ind AS 28
           Investments in Associates and Joint Ventures. However, in some
           cases, Ind AS 110, Ind AS 27 or Ind AS 28 require or permit an entity
           to account for an interest in a subsidiary, associate or joint venture
           using Ind AS 109; in those cases, entities shall apply the requirements
           of this Ind AS. Entities shall also apply this Ind AS to all derivatives
           linked to interests in subsidiaries, associates or joint ventures unless
           the derivative meets the definition of an equity instrument in Ind AS
           32.

     (b)   ...

     (d)   insurance contracts as defined in Ind AS 104 Insurance Contracts.
           However, this Ind AS applies to derivatives that are embedded in
           insurance contracts if Ind AS 109 requires the entity to account for
           them separately. Moreover, an issuer shall apply this Ind AS to
           financial guarantee contracts if the issuer applies Ind AS 109 in
           recognising and measuring the contracts, but shall apply Ind AS 104 if
           the issuer elects, in accordance with paragraph 4(d) of Ind AS 104, to
           apply Ind AS 104 in recognising and measuring them.

     (e)   financial instruments, contracts and obligations under share-based
           payment transactions to which Ind AS 102 Share-based Payment
           applies, except that this Ind AS applies to contracts within the scope
           of Ind AS 109.

     (f)   ...

4   This Ind AS applies to recognised and unrecognised financial instruments.
     Recognised financial instruments include financial assets and financial
     liabilities that are within the scope of Ind AS 109. Unrecognised financial
     instruments include some financial instruments that, although outside the
     scope of Ind AS 109, are within the scope of this Ind AS.

5    This Ind AS applies to contracts to buy or sell a non-financial item that are
     within the scope of Ind AS 109.

5A   The credit risk disclosure requirements in paragraph 35A­35N apply to
     those rights that Ind AS 115 Revenue from Contracts with Customers
     specifies are accounted for in accordance with Ind AS 109 for the purposes
     of recognising impairment gains or losses. Any reference to financial assets
     or financial instruments in these paragraphs shall include those rights unless
     otherwise specified.

8    The carrying amounts of each of the following categories, as specified in Ind
     AS 109, shall be disclosed either in the balance sheet or in the notes:

     (a)   financial assets measured at fair value through profit or loss, showing
           separately (i) those designated as such upon initial recognition or
           subsequently in accordance with paragraph 6.7.1 of Ind AS 109 and
           (ii) those mandatorily measured at fair value through profit or loss in
           accordance with Ind AS 109.

     (b)­(d) [deleted]

     (e)   financial liabilities at fair value through profit or loss, showing
           separately (i) those designated as such upon initial recognition or
           subsequently in accordance with paragraph 6.7.1 of Ind AS 109 and

           (ii)those that meet the definition of held for trading in Ind AS 109.

     (f)   financial assets measured at amortised cost.

     (g)   financial liabilities measured at amortised cost.

     (h)   financial assets measured at fair value through other comprehensive
           income, showing separately (i) financial assets that are measured at
           fair value through other comprehensive income in accordance with
           paragraph 4.1.2A of Ind AS 109; and

           (ii)investments in equity instruments designated as such upon initial
           recognition in accordance with paragraph 5.7.5 of Ind AS 109.
Financial assets or financial liabilities at fair value through profit or loss

9     If the entity has designated as measured at fair value through profit or loss a
      financial asset (or group of financial assets) that would otherwise be
      measured at fair value through other comprehensive income or amortised
      cost, it shall disclose:

      (a)   the maximum exposure to credit risk (see paragraph 36(a)) of the
            financial asset (or group of financial assets) at the end of the reporting
            period.

      (b)   the amount by which any related credit derivatives or similar
            instruments mitigate that maximum exposure to credit risk (see
            paragraph 36(b)).

      (c)   the amount of change, during the period and cumulatively, in the fair
            value of the financial asset (or group of financial assets) that is
            attributable to changes in the credit risk of the financial asset
            determined either:

            (i)   ...

      (d)   the amount of the change in the fair value of any related credit
            derivatives or similar instruments that has occurred during the period
            and cumulatively since the financial asset was designated.

10    If the entity has designated a financial liability as at fair value through profit
      or loss in accordance with paragraph 4.2.2 of Ind AS 109 and is required to
      present the effects of changes in that liability's credit risk in other
      comprehensive income (see paragraph 5.7.7 of Ind AS 109), it shall
      disclose:

      (a)   the amount of change, cumulatively, in the fair value of the financial
            liability that is attributable to changes in the credit risk of that liability
            (see paragraphs B5.7.13­B5.7.20 of Ind AS 109 for guidance on
            determining the effects of changes in a liability's credit risk).

     (b)    the difference between the financial liability's carrying amount and
            the amount the entity would be contractually required to pay at
            maturity to the holder of the obligation.

     (c)    any transfers of the cumulative gain or loss within equity during the
            period including the reason for such transfers.

      (d)   if a liability is derecognised during the period, the amount (if any)
            presented in other comprehensive income that was realised at
            derecognition.

10A If an entity has designated a financial liability as at fair value through profit
    or loss in accordance with paragraph 4.2.2 of Ind AS 109 and is required to
    present all changes in the fair value of that liability (including the effects of
    changes in the credit risk of the liability) in profit or loss (see paragraphs
    5.7.7 and 5.7.8 of Ind AS 109), it shall disclose:

      (a)   the amount of change, during the period and cumulatively, in the fair
            value of the financial liability that is attributable to

            changes in the credit risk of that liability (see paragraphs B5.7.13­
            B5.7.20 of Ind AS 109 for guidance on determining the effects of
            changes in a liability's credit risk); and

      (b)   the difference between the financial liability's carrying amount and
            the amount the entity would be contractually required to pay at
            maturity to the holder of the obligation.

11    The entity shall also disclose:

      (a)   a detailed description of the methods used to comply with the
            requirements in paragraphs 9(c), 10(a) and 10A(a) and paragraph
            5.7.7(a) of Ind AS 109, including an explanation of why the method is
            appropriate.

      (b)   if the entity believes that the disclosure it has given, either in the
            balance sheet or in the notes, to comply with the requirements in
            paragraph 9(c), 10(a) or 10A(a) or paragraph 5.7.7(a) of Ind AS 109
            does not faithfully represent the change in the fair value of the
            financial asset or financial liability attributable to changes in its credit
            risk, the reasons for reaching this conclusion and the factors it believes
            are relevant.

      (c)   a detailed description of the methodology or methodologies used to
            determine whether presenting the effects of changes in a liability's
            credit risk in other comprehensive income would create or enlarge an
            accounting mismatch in profit or loss (see paragraphs 5.7.7 and 5.7.8
            of Ind AS 109). If an entity is required to present the effects of
            changes in a liability's credit risk in profit or loss (see paragraph 5.7.8
            of Ind AS 109), the disclosure must include a detailed description of
            the economic relationship described in paragraph B5.7.6 of Ind AS
            109.

Investments in equity instruments designated at fair value through
other comprehensive income

11A If an entity has designated investments in equity instruments to be measured
    at fair value through other comprehensive income, as permitted by
    paragraph 5.7.5 of Ind AS 109, it shall disclose:

      (a)   which investments in equity instruments have been designated to be
            measured at fair value through other comprehensive income.

      (b)   the reasons for using this presentation alternative.

      (c)   the fair value of each such investment at the end of the reporting
            period.

      (d)   dividends recognised during the period, showing separately those
            related to investments derecognised during the reporting period and
            those related to investments held at the end of the reporting period.

      (e)   any transfers of the cumulative gain or loss within equity during the
            period including the reason for such transfers.

11B If an entity derecognised investments in equity instruments measured at fair
    value through other comprehensive income during the reporting period, it
    shall disclose:

      (a)   the reasons for disposing of the investments.

      (b)   the fair value of the investments at the date of derecognition.

      (c)   the cumulative gain or loss on disposal.

12­12A [Deleted]

12B An entity shall disclose if, in the current or previous reporting periods, it has
    reclassified any financial assets in accordance with paragraph 4.4.1 of Ind
    AS 109. For each such event, an entity shall disclose:

      (a)   the date of reclassification.
      (b)   a detailed explanation of the change in business model and a
            qualitative description of its effect on the entity's financial statements.

      (c)   the amount reclassified into and out of each category.

12C For each reporting period following reclassification until derecognition, an
    entity shall disclose for assets reclassified out of the fair value through profit
    or loss category so that they are measured at amortised cost or fair value
    through other comprehensive income in accordance with paragraph 4.4.1 of
    Ind AS 109:

      (a)   the effective interest rate determined on the date of reclassification;
            and

      (b)   the interest revenue recognised.

12D If, since its last annual reporting date, an entity has reclassified financial
    assets out of the fair value through other comprehensive income category so
    that they are measured at amortised cost or out of the fair value through
    profit or loss category so that they are measured at amortised cost or fair
    value through other comprehensive income it shall disclose:

      (a)   the fair value of the financial assets at the end of the reporting period;
            and

      (b)   the fair value gain or loss that would have been recognised in profit or
            loss or other comprehensive income during the reporting period if the
            financial assets had not been reclassified.

14    An entity shall disclose:

      (a)   the carrying amount of financial assets it has pledged as collateral for
            liabilities or contingent liabilities, including amounts that have been
            reclassified in accordance with paragraph 3.2.23(a) of Ind AS 109;
            and

      (b)   the terms and conditions relating to its pledge.

16   [Deleted]

16A The carrying amount of financial assets measured at fair value through other
    comprehensive income in accordance with paragraph 4.1.2A of Ind AS 109
    is not reduced by a loss allowance and an entity shall not present the loss
    allowance separately in the balance sheet as a reduction of the carrying
     amount of the financial asset. However, an entity shall disclose the loss
     allowance in the notes to the financial statements.

20   An entity shall disclose the following items of income, expense, gains or
     losses either in the statement of profit and loss or in the notes:

     (a)   net gains or net losses on:

           (i)   financial assets or financial liabilities measured at fair value
                 through profit or loss, showing separately those on financial
                 assets or financial liabilities designated as such upon initial
                 recognition or subsequently in accordance with paragraph 6.7.1
                 of Ind AS 109, and those on financial assets or financial
                 liabilities that are mandatorily measured at fair value through
                 profit or loss in accordance with Ind AS 109 (eg financial
                 liabilities that meet the definition of held for trading in Ind AS
                 109). For financial liabilities designated as at fair value through
                 profit or loss, an entity shall show separately the amount of gain
                 or loss recognised in other comprehensive income and the
                 amount recognised in profit or loss.

           (ii)­(iv) [deleted]

           (v)   financial liabilities measured at amortised cost.

           (vi) financial assets measured at amortised cost.

           (vii) investments in equity instruments designated at fair value
                 through other comprehensive income in accordance with
                 paragraph 5.7.5 of Ind AS 109.

           (viii) financial assets measured at fair value through other

                 comprehensive       income in accordance with

                 paragraph 4.1.2A of Ind AS 109, showing separately the amount
                 of gain or loss recognised in other comprehensive income
                 during the period and the amount reclassified upon
                 derecognition from accumulated other comprehensive income to
                 profit or loss for the period.

     (b)   total interest revenue and total interest expense (calculated using the
           effective interest method) for financial assets that are measured at
           amortised cost or that are measured at fair value through other
           comprehensive income in accordance with paragraph 4.1.2A of Ind
           AS 109 (showing these amounts separately); or financial liabilities
           that are not measured at fair value through profit or loss.

     (c)   fee income and expense (other than amounts included in determining
           the effective interest rate) arising from:

           (i)    financial assets and financial liabilities that are not at fair value
                  through profit or loss; and

           (ii)   trust and other fiduciary activities that result in the holding or
                  investing of assets on behalf of individuals, trusts, retirement
                  benefit plans, and other institutions.

     (d)   [deleted]

     (e)   [deleted]

20A An entity shall disclose an analysis of the gain or loss recognised in the
    statement of profit and loss arising from the derecognition of financial
    assets measured at amortised cost, showing separately gains and losses
    arising from derecognition of those financial assets. This disclosure shall
    include the reasons for derecognising those financial assets.

Hedge accounting

21A An entity shall apply the disclosure requirements in paragraphs 21B­24F for
    those risk exposures that an entity hedges and for which it elects to apply
    hedge accounting. Hedge accounting disclosures shall provide information
    about:

     (a)   an entity's risk management strategy and how it is applied to manage
           risk;

     (b)   how the entity's hedging activities may affect the amount, timing and
           uncertainty of its future cash flows; and

     (c)   the effect that hedge accounting has had on the entity's balance sheet,
           statement of profit and loss and statement of changes in equity.

21B An entity shall present the required disclosures in a single note or separate
    section in its financial statements. However, an entity need not duplicate
    information that is already presented elsewhere, provided that the
    information is incorporated by cross-reference from the financial statements
     to some other statement, such as a management commentary or risk report,
     that is available to users of the financial statements on the same terms as the
     financial statements and at the same time. Without the information
     incorporated by cross-reference, the financial statements are incomplete.

21C When paragraphs 22A­24F require the entity to separate by risk category
    the information disclosed, the entity shall determine each risk category on
    the basis of the risk exposures an entity decides to hedge and for which
    hedge accounting is applied. An entity shall determine risk categories
    consistently for all hedge accounting disclosures.

21D To meet the objectives in paragraph 21A, an entity shall (except as
    otherwise specified below) determine how much detail to disclose, how
    much emphasis to place on different aspects of the disclosure requirements,
    the appropriate level of aggregation or disaggregation, and whether users of
    financial statements need additional explanations to evaluate the quantitative
    information disclosed. However, an entity shall use the same level of
    aggregation or disaggregation it uses for disclosure requirements of related
    information in this Ind AS and Ind AS 113 Fair Value Measurement.

The risk management strategy

22   [Deleted]

22A An entity shall explain its risk management strategy for each risk category of
    risk exposures that it decides to hedge and for which hedge accounting is
    applied. This explanation should enable users of financial statements to
    evaluate (for example):

     (a)   how each risk arises.

     (b)   how the entity manages each risk; this includes whether the entity
           hedges an item in its entirety for all risks or hedges a risk component
           (or components) of an item and why.

     (c)   the extent of risk exposures that the entity manages.

22B To meet the requirements in paragraph 22A, the information should include
    (but is not limited to) a description of:

     (a)   the hedging instruments that are used (and how they are used) to
           hedge risk exposures;

     (b)   how the entity determines the economic relationship between the
            hedged item and the hedging instrument for the purpose of assessing
            hedge effectiveness; and
      (c)   how the entity establishes the hedge ratio and what the sources of
            hedge ineffectiveness are.

22C When an entity designates a specific risk component as a hedged item (see
    paragraph 6.3.7 of Ind AS 109) it shall provide, in addition to the
    disclosures required by paragraphs 22A and 22B, qualitative or quantitative
    information about:

      (a)   how the entity determined the risk component that is designated as the
            hedged item (including a description of the nature of the relationship
            between the risk component and the item as a whole); and

      (b)   how the risk component relates to the item in its entirety (for example,
            the designated risk component historically covered on average 80 per
            cent of the changes in fair value of the item as a whole).

The amount, timing and uncertainty of future cash flows

23   [Deleted]

23A Unless exempted by paragraph 23C, an entity shall disclose by risk category
    quantitative information to allow users of its financial statements to evaluate
    the terms and conditions of hedging instruments and how they affect the
    amount, timing and uncertainty of future cash flows of the entity.

23B To meet the requirement in paragraph 23A, an entity shall provide a
    breakdown that discloses:

      (a)   a profile of the timing of the nominal amount of the hedging
            instrument; and

      (b)   if applicable, the average price or rate (for example strike or forward
            prices etc) of the hedging instrument.

23C In situations in which an entity frequently resets (ie discontinues and
    restarts) hedging relationships because both the hedging instrument and the
    hedged item frequently change (ie the entity uses a dynamic process in
    which both the exposure and the hedging instruments used to manage that
    exposure do not remain the same for long--such as in the example in
    paragraph B6.5.24(b) of Ind AS 109) the entity:

      (a)   is exempt from providing the disclosures required by paragraphs 23A
            and 23B.

      (b)   shall disclose:

            (i)    information about what the ultimate risk management strategy is
                   in relation to those hedging relationships;

            (ii)   a description of how it reflects its risk management strategy by
                   using hedge accounting and designating those particular
                   hedging relationships; and

            (iii) an indication of how frequently the hedging relationships are
                  discontinued and restarted as part of the entity's process in
                  relation to those hedging relationships.

23D An entity shall disclose by risk category a description of the sources of
    hedge ineffectiveness that are expected to affect the hedging relationship
    during its term.

23E If other sources of hedge ineffectiveness emerge in a hedging relationship,
    an entity shall disclose those sources by risk category and explain the
    resulting hedge ineffectiveness.

23F For cash flow hedges, an entity shall disclose a description of any forecast
    transaction for which hedge accounting had been used in the previous
    period, but which is no longer expected to occur.

The effects of hedge accounting on financial position and performance

24   [Deleted]

24A An entity shall disclose, in a tabular format, the following amounts related to
    items designated as hedging instruments separately by risk category for each
    type of hedge (fair value hedge, cash flow hedge or hedge of a net
    investment in a foreign operation):

     (a)    the carrying amount of the hedging instruments (financial assets
            separately from financial liabilities);

     (b)    the line item in the balance sheet that includes the hedging instrument;

     (c)    the change in fair value of the hedging instrument used as the basis for
            recognising hedge ineffectiveness for the period; and
           (d)    the nominal amounts (including quantities such as tonnes or cubic
                  metres) of the hedging instruments.

     24B An entity shall disclose, in a tabular format, the following amounts related to
         hedged items separately by risk category for the types of hedges as follows:

           (a)    for fair value hedges:

                  (i)    the carrying amount of the hedged item recognised in the
                         balance sheet (presenting assets separately from liabilities);

                  (ii)   the accumulated amount of fair value hedge adjustments on the
                         hedged item included in the carrying amount of the hedged item
                         recognised in the balance sheet (presenting assets separately
                         from liabilities);

                  (iii) the line item in the balance sheet that includes the hedged item;

                  (iv) the change in value of the hedged item used as the basis for
                       recognising hedge ineffectiveness for the period; and

           (c)    the accumulated amount of fair value hedge adjustments remaining in
                  the balance sheet for any hedged items that have ceased to be adjusted
                  for hedging gains and losses in accordance with paragraph 6.5.10 of
                  Ind AS 109.

     (b)   for cash flow hedges and hedges of a net investment in a foreign operation:

           (i)    the change in value of the hedged item used as the basis for
                  recognising hedge ineffectiveness for the period (ie for cash flow
                  hedges the change in value used to determine the recognised hedge
                  ineffectiveness in accordance with paragraph 6.5.11(c) of Ind AS
                  109);

           (ii)   the balances in the cash flow hedge reserve and the foreign currency
                  translation reserve for continuing hedges that are accounted for in
                  accordance with paragraphs 6.5.11 and 6.5.13(a) of Ind AS 109; and

           (iii) the balances remaining in the cash flow hedge reserve and the foreign
                 currency translation reserve from any hedging relationships for which
                 hedge accounting is no longer applied.

24C An entity shall disclose, in a tabular format, the following amounts separately by
     risk category for the types of hedges as follows:
(a)   for fair value hedges:

      (i)    hedge ineffectiveness--ie the difference between the hedging gains or
             losses of the hedging instrument and the hedged item--recognised in
             profit or loss (or other comprehensive income for hedges of an equity
             instrument for which an entity has elected to present changes in fair
             value in other comprehensive income in accordance with paragraph
             5.7.5 of Ind AS 109); and

      (ii)   the line item in the statement of profit and loss that includes the
             recognised hedge ineffectiveness.

(b)   for cash flow hedges and hedges of a net investment in a foreign operation:

      (i)    hedging gains or losses of the reporting period that were recognised in
             other comprehensive income;

      (ii)   hedge ineffectiveness recognised in profit or loss;

      (iii) the line item in the statement of profit and loss that includes the
            recognised hedge ineffectiveness;

             (iv) the amount reclassified from the cash flow hedge reserve or the
                  foreign currency translation reserve into profit or loss as a
                  reclassification adjustment (see Ind AS 1) (differentiating
                  between amounts for which hedge accounting had previously
                  been used, but for which the hedged future cash flows are no
                  longer expected to occur, and amounts that have been
                  transferred because the hedged item has affected profit or loss);

             (v)   the line item in the statement of profit and loss that includes the
                   reclassification adjustment (see Ind AS 1); and

             (vi) for hedges of net positions, the hedging gains or losses
                  recognised in a separate line item in the statement of profit and
                  loss (see paragraph 6.6.4 of Ind AS 109).

24D When the volume of hedging relationships to which the exemption in
    paragraph 23C applies is unrepresentative of normal volumes during the
    period (ie the volume at the reporting date does not reflect the volumes
    during the period) an entity shall disclose that fact and the reason it believes
    the volumes are unrepresentative.
24E An entity shall provide a reconciliation of each component of equity and an
    analysis of other comprehensive income in accordance with Ind AS 1 that,
    taken together:

     (a)   differentiates, at a minimum, between the amounts that relate to the
           disclosures in paragraph 24C(b)(i) and (b)(iv) as well as the amounts
           accounted for in accordance with paragraph 6.5.11(d)(i) and (d)(iii) of
           Ind AS 109;

     (b)   differentiates between the amounts associated with the time value of
           options that hedge transaction related hedged items and the amounts
           associated with the time value of options that hedge time-period
           related hedged items when an entity accounts for the time value of an
           option in accordance with paragraph 6.5.15 of Ind AS 109; and

     (c)   differentiates between the amounts associated with forward elements
           of forward contracts and the foreign currency basis spreads of
           financial instruments that hedge transaction related hedged items, and
           the amounts associated with forward elements of forward contracts
           and the foreign currency basis spreads of financial instruments that
           hedge time-period related hedged items when an entity accounts for
           those amounts in accordance with paragraph 6.5.16 of Ind AS 109.

24F An entity shall disclose the information required in paragraph 24E separately
    by risk category. This disaggregation by risk may be provided in the notes to
    the financial statements.

Option to designate a credit exposure as measured at fair value through
profit or loss

24G If an entity designated a financial instrument, or a proportion of it, as
    measured at fair value through profit or loss because it uses a credit
    derivative to manage the credit risk of that financial instrument it shall
    disclose:

     (a)   for credit derivatives that have been used to manage the credit risk of
           financial instruments designated as measured at fair value through
           profit or loss in accordance with paragraph 6.7.1 of Ind AS 109, a
           reconciliation of each of the nominal amount and the fair value at the
           beginning and at the end of the period;

     (b)   the gain or loss recognised in profit or loss on designation of a
           financial instrument, or a proportion of it, as measured at fair value
           through profit or loss in accordance with paragraph 6.7.1 of Ind AS
           109; and

     (c)   on discontinuation of measuring a financial instrument, or a
           proportion of it, at fair value through profit or loss, that financial
           instrument's fair value that has become the new carrying amount in
           accordance with paragraph 6.7.4(b) of Ind AS 109 and the related
           nominal or principal amount (except for providing comparative
           information in accordance with Ind AS 1, an entity does not need to
           continue this disclosure in subsequent periods).

28   In some cases, an entity does not recognise a gain or loss on initial
     recognition of a financial asset or financial liability because the fair value is
     neither evidenced by a quoted price in an active market for an identical asset
     or liability (ie a Level 1 input) nor based on a valuation technique that uses
     only data from observable markets (see paragraph B5.1.2A of Ind AS 109).
     In such cases, the entity shall disclose by class of financial asset or financial
     liability:

     (a)   its accounting policy for recognising in profit or loss the difference
           between the fair value at initial recognition and the transaction price to
           reflect a change in factors (including time) that market participants
           would take into account when pricing the asset or liability (see
           paragraph B5.1.2A(b) of Ind AS 109).

     (b)   the aggregate difference yet to be recognised in profit or loss at the
           beginning and end of the period and a reconciliation of changes in the
           balance of this difference.

     (c)   why the entity concluded that the transaction price was not the best
           evidence of fair value, including a description of the evidence that
           supports the fair value.

29   Disclosures of fair value are not required:

     (a)   ...

     (b)   [deleted]

     (c)   ...

30   In the case described in paragraph 29(c), an entity shall disclose information
     to help users of the financial statements make their own judgements about
     the extent of possible differences between the carrying amount of those
     contracts and their fair value, including:
     (a)      ...

Credit risk

Scope and objectives

35A An entity shall apply the disclosure requirements in paragraphs 35F­35N to
    financial instruments to which the impairment requirements in Ind AS 109
    are applied. However:

     (a)      for trade receivables, contract assets and lease receivables, paragraph
              35J applies to those trade receivables, contract assets or lease
              receivables on which lifetime expected credit losses are recognised in
              accordance with paragraph 5.5.15 of Ind AS 109, if those financial
              assets are modified while more than 30 days past due; and

     (b)      paragraph 35K(b) does not apply to lease receivables.

35B The credit risk disclosures made in accordance with paragraphs 35F­35N
    shall enable users of financial statements to understand the effect of credit
    risk on the amount, timing and uncertainty of future cash flows. To achieve
    this objective, credit risk disclosures shall provide:

     (a)      information about an entity's credit risk management practices and
              how they relate to the recognition and measurement of expected credit
              losses, including the methods, assumptions and information used to
              measure expected credit losses;

     (b)      quantitative and qualitative information that allows users of financial
              statements to evaluate the amounts in the financial statements arising
              from expected credit losses, including changes in the amount of
              expected credit losses and the reasons for those changes; and

     (c)      information about an entity's credit risk exposure (ie the credit risk
              inherent in an entity's financial assets and commitments to extend
              credit) including significant credit risk concentrations.

35C An entity need not duplicate information that is already presented elsewhere,
    provided that the information is incorporated by cross-reference from the
    financial statements to other statements, such as a management commentary
    or risk report that is available to users of the financial statements on the
    same terms as the financial statements and at the same time. Without the
    information incorporated by cross-reference, the financial statements are
     incomplete.

35D To meet the objectives in paragraph 35B, an entity shall (except as otherwise
    specified) consider how much detail to disclose, how much emphasis to
    place on different aspects of the disclosure requirements, the appropriate
    level of aggregation or disaggregation, and whether users of financial
    statements need additional explanations to evaluate the quantitative
    information disclosed.

35E If the disclosures provided in accordance with paragraphs 35F­35N are
    insufficient to meet the objectives in paragraph 35B, an entity shall disclose
    additional information that is necessary to meet those objectives.

The credit risk management practices

35F An entity shall explain its credit risk management practices and how they
    relate to the recognition and measurement of expected credit losses. To meet
    this objective an entity shall disclose information that enables users of
    financial statements to understand and evaluate:

     (a)   how an entity determined whether the credit risk of financial
           instruments has increased significantly since initial recognition,
           including, if and how:

           (i)     financial instruments are considered to have low credit risk in
                   accordance with paragraph 5.5.10 of Ind AS 109, including the
                   classes of financial instruments to which it applies; and

           (ii)    the presumption in paragraph 5.5.11 of Ind AS 109, that there
                   have been significant increases in credit risk since initial
                   recognition when financial assets are more than 30 days past
                   due, has been rebutted;

     (b)   an entity's definitions of default, including the reasons for selecting
           those definitions;

     (c)   how the instruments were grouped if expected credit losses were
           measured on a collective basis;

     (d)   how an entity determined that financial assets are credit-impaired
           financial assets;

     (e)   an entity's write-off policy, including the indicators that there is no
           reasonable expectation of recovery and information about the policy
           for financial assets that are written-off but are still subject to
           enforcement activity; and

     (f)   how the requirements in paragraph 5.5.12 of Ind AS 109 for the
           modification of contractual cash flows of financial assets have been
           applied, including how an entity:

           (i)    determines whether the credit risk on a financial asset that has
                  been modified while the loss allowance was measured at an
                  amount equal to lifetime expected credit losses, has improved to
                  the extent that the loss allowance reverts to being measured at
                  an amount equal to 12-month expected credit losses in
                  accordance with paragraph 5.5.5 of Ind AS 109; and

           (ii)   monitors the extent to which the loss allowance on financial
                  assets meeting the criteria in (i) is subsequently remeasured at
                  an amount equal to lifetime expected credit losses in accordance
                  with paragraph 5.5.3 of Ind AS 109.

35G An entity shall explain the inputs, assumptions and estimation techniques
    used to apply the requirements in Section 5.5 of Ind AS 109. For this
    purpose an entity shall disclose:

     (a)   the basis of inputs and assumptions and the estimation techniques
           used to:

           (i)    measure the 12-month and lifetime expected credit losses;

           (ii)   determine whether the credit risk of financial instruments have
                  increased significantly since initial recognition; and

           (iii) determine whether a financial asset is a credit-impaired financial
                 asset.

     (b)   how forward-looking information has been incorporated into the
           determination of expected credit losses, including the use of
           macroeconomic information; and

     (c)   changes in the estimation techniques or significant assumptions made
           during the reporting period and the reasons for those changes.

Quantitative and qualitative information about amounts arising from expected
credit losses
     35H To explain the changes in the loss allowance and the reasons for those
         changes, an entity shall provide, by class of financial instrument, a
         reconciliation from the opening balance to the closing balance of the loss
         allowance, in a table, showing separately the changes during the period for:

           (a)   the loss allowance measured at an amount equal to 12-month expected
                 credit losses;

           (b)   the loss allowance measured at an amount equal to lifetime expected
                 credit losses for:

                 (i)    financial instruments for which credit risk has increased
                        significantly since initial recognition but that are not credit-
                        impaired financial assets;

                 (ii)   financial assets that are credit-impaired at the reporting date (but
                        that are not purchased or originated credit-impaired); and

                 (iii) trade receivables, contract assets or lease receivables for which
                       the loss allowances are measured in accordance with paragraph
                       5.5.15 of Ind AS 109.

           (c)   financial assets that are purchased or originated credit-impaired. In
                 addition to the reconciliation, an entity shall disclose the total amount
                 of undiscounted expected credit losses at initial recognition on
                 financial assets initially recognised during the reporting period.

35I To enable users of financial statements to understand the changes in the loss
     allowance disclosed in accordance with paragraph 35H, an entity shall provide an
     explanation of how significant changes in the gross carrying amount of financial
     instruments during the period contributed to changes in the loss allowance. The
     information shall be provided separately for financial instruments that represent
     the loss allowance as listed in paragraph 35H(a)­(c) and shall include relevant
     qualitative and quantitative information. Examples of changes in the gross
     carrying amount of financial instruments that contributed to the changes in the
     loss allowance may include:

     (a)   changes because of financial instruments originated or acquired during the
           reporting period;

     (b)   the modification of contractual cash flows on financial assets that do not
           result in a derecognition of those financial assets in accordance with Ind AS
           109;
     (c)   changes because of financial instruments that were derecognised (including
           those that were written-off) during the reporting period; and

     (d)   changes arising from whether the loss allowance is measured at an amount
           equal to 12-month or lifetime expected credit losses.

35J To enable users of financial statements to understand the nature and effect of
     modifications of contractual cash flows on financial assets that have not resulted
     in derecognition and the effect of such modifications on the measurement of
     expected credit losses, an entity shall disclose:

     (a)   the amortised cost before the modification and the net modification gain or
           loss recognised for financial assets for which the contractual cash flows
           have been modified during the reporting period while they had a loss
           allowance measured at an amount equal to lifetime expected credit losses;
           and

     (b)   the gross carrying amount at the end of the reporting period of financial
           assets that have been modified since initial recognition at a time when the
           loss allowance was measured at an amount equal to lifetime expected credit
           losses and for which the loss allowance has changed during the reporting
           period to an amount equal to 12-month expected credit losses.

35K To enable users of financial statements to understand the effect of collateral and
     other credit enhancements on the amounts arising from expected credit losses, an
     entity shall disclose by class of financial instrument:

     (a)   the amount that best represents its maximum exposure to credit risk at the
           end of the reporting period without taking account of any collateral held or
           other credit enhancements (eg netting agreements that do not qualify for
           offset in accordance with Ind AS 32).

           (b)   a narrative description of collateral held as security and other credit
                 enhancements, including:

                 (i)    a description of the nature and quality of the collateral held;

                 (ii)   an explanation of any significant changes in the quality of that
                        collateral or credit enhancements as a result of deterioration or
                        changes in the collateral policies of the entity during the
                        reporting period; and

                 (iii) information about financial instruments for which an entity has
                       not recognised a loss allowance because of the collateral.
     (c)   quantitative information about the collateral held as security and other
           credit enhancements (for example, quantification of the extent to
           which collateral and other credit enhancements mitigate credit risk)
           for financial assets that are credit-impaired at the reporting date.

35L An entity shall disclose the contractual amount outstanding on financial
    assets that were written off during the reporting period and are still subject
    to enforcement activity.

Credit risk exposure

35M To enable users of financial statements to assess an entity's credit risk
    exposure and understand its significant credit risk concentrations, an entity
    shall disclose, by credit risk rating grades, the gross carrying amount of
    financial assets and the exposure to credit risk on loan commitments and
    financial guarantee contracts. This information shall be provided separately
    for financial instruments:

     (a)   for which the loss allowance is measured at an amount equal to 12-
           month expected credit losses;

     (b)   for which the loss allowance is measured at an amount equal to
           lifetime expected credit losses and that are:

           (i)    financial instruments for which credit risk has increased
                  significantly since initial recognition but that are not credit-
                  impaired financial assets;

           (ii)   financial assets that are credit-impaired at the reporting date (but
                  that are not purchased or originated credit-impaired); and

           (iii) trade receivables, contract assets or lease receivables for which
                 the loss allowances are measured in accordance with paragraph
                 5.5.15 of Ind AS 109.

     (c)   that are purchased or originated credit-impaired financial assets.

35N For trade receivables, contract assets and lease receivables to which an
    entity applies paragraph 5.5.15 of Ind AS 109, the information provided in
    accordance with paragraph 35M may be based on a provision matrix (see
    paragraph B5.5.35 of Ind AS 109).

36   For all financial instruments within the scope of this Ind AS, but to which
      the impairment requirements in Ind AS 109 are not applied, an entity shall
      disclose by class of financial instrument:

      (a)   the amount that best represents its maximum exposure to credit risk at
            the end of the reporting period without taking account of any
            collateral held or other credit enhancements (eg netting agreements
            that do not quality for offset in accordance with Ind AS 32); this
            disclosure is not required for financial instruments whose carrying
            amount best represents the maximum exposure to credit risk.

      (b)   a description of collateral held as security and other credit
            enhancements, and their financial effect (eg quantification of the
            extent to which collateral and other credit enhancements mitigate
            credit risk) in respect of the amount that best represents the maximum
            exposure to credit risk (whether disclosed in accordance with (a) or
            represented by the carrying amount of a financial instrument).

      (c)   [deleted]

      (d)   ...

37    [Deleted]

42C For the purposes of applying the disclosure requirements in paragraphs
    42E­42H, an entity has continuing involvement in a transferred financial
    asset if, as part of the transfer, the entity retains any of the contractual rights
    or obligations inherent in the transferred financial asset or obtains any new
    contractual rights or obligations relating to the transferred financial asset.
    For the purposes of applying the disclosure requirements in paragraphs
    42E­42H, the following do not constitute continuing involvement:

      (a)   ...

      (b)   an arrangement whereby an entity retains the contractual rights to
            receive the cash flows of a financial asset but assumes a contractual
            obligation to pay the cash flows to one or more entities and the
            conditions in paragraph 3.2.5(a)­(c) of Ind AS 109 are met.

Transferred financial assets that are not derecognised in their entirety

42D An entity may have transferred financial assets in such a way that part or all
    of the transferred financial assets do not qualify for derecognition. To meet
    the objectives set out in paragraph 42B(a), the entity shall disclose at each
    reporting date for each class of transferred financial assets that are not
               derecognised in their entirety:

              (a)    ...

              (f)    when the entity continues to recognise the assets to the extent of its
                     continuing involvement (see paragraphs 3.2.6(c)(ii) and 3.2.16 of Ind
                     AS 109), the total carrying amount of the original assets before the
                     transfer, the carrying amount of the assets that the entity continues to
                     recognise, and the carrying amount of the associated liabilities.

        Transferred financial assets that are derecognised in their entirety

        42E To meet the objectives set out in paragraph 42B(b), when an entity
            derecognises transferred financial assets in their entirety (see paragraph
            3.2.6(a) and (c)(i) of Ind AS 109) but has continuing involvement in them,
            the entity shall disclose, as a minimum, for each type of continuing
            involvement at each reporting date:

              (a)    ...


C14 In Appendix A, the definition of `credit risk rating grades' is added, the definition of
        `past due' is deleted and the last paragraph is amended to read as follows:

        credit risk Rating of credit risk based on the risk of a default occurring rating
        grades on the financial instrument.

        The following terms are defined in paragraph 11 of Ind AS 32, Appendix A of
        Ind AS 109 or Appendix A of Ind AS 113 and are used in this Ind AS with the
        meaning specified in Ind AS 32, Ind AS 109 and Ind AS 113.

              amortised cost of a financial asset or financial liability

              contract asset

              credit-impaired financial assets

              derecognition

              derivative

              dividends

              effective interest method
             equity instrument

             expected credit losses

             fair value

             financial asset

             financial guarantee contract

             financial instrument

             financial liability

             financial liability at fair value through profit or loss

             forecast transaction

             gross carrying amount

             hedging instrument

             held for trading

             impairment gains or losses

             loss allowance

             purchased or originated credit-impaired financial assets

             reclassification date

             regular way purchase or sale.

C15 In Appendix B, paragraphs B1, B5, B9, B10, B22 and B27 are amended to read as
       follows, the heading above paragraph B4 and paragraph B4 are deleted and the
       heading above paragraph B8A and paragraphs B8A­B8J are added:

       B1    Paragraph 6 requires an entity to group financial instruments into classes
             that are appropriate to the nature of the information disclosed and that take
             into account the characteristics of those financial instruments. The classes
             described in paragraph 6 are determined by the entity and are, thus, distinct
             from the categories of financial instruments specified in Ind AS 109 (which
     determine how financial instruments are measured and where changes in
     fair value are recognised).

B4   [Deleted]

B5   Paragraph 21 requires disclosure of the measurement basis (or bases) used in
     preparing the financial statements and the other accounting policies used
     that are relevant to an understanding of the financial statements. For
     financial instruments, such disclosure may include:

     (a)   for financial liabilities designated as at fair value through profit or
           loss:

           (i)    the nature of the financial liabilities the entity has designated as
                  at fair value through profit or loss;

           (ii)   the criteria for so designating such financial liabilities on initial
                  recognition; and

           (iii) how the entity has satisfied the conditions in paragraph 4.2.2 of
                 Ind AS 109 for such designation.

     (aa) for financial assets designated as measured at fair value through profit
          or loss:

           (i)    the nature of the financial assets the entity has designated as
                  measured at fair value through profit or loss; and

           (ii)   how the entity has satisfied the criteria in paragraph 4.1.5 of Ind
                  AS 109 for such designation.

     (b)   [deleted]

     (c)   whether regular way purchases and sales of financial assets are
           accounted for at trade date or at settlement date (see paragraph 3.1.2
           of Ind AS 109).

     (d)   [deleted]

     (e)   ...

     (f)   [deleted]

     (g)   [deleted]
      Credit risk management practices (paragraphs 35F­35G)

B8A   Paragraph 35F(b) requires the disclosure of information about how an entity has
      defined default for different financial instruments and the reasons for selecting
      those definitions. In accordance with paragraph 5.5.9 of Ind AS 109, the
      determination of whether lifetime expected credit losses should be recognised is
      based on the increase in the risk of a default occurring since initial recognition.
      Information about an entity's definitions of default that will assist users of
      financial statements in understanding how an entity has applied the expected
      credit loss requirements in Ind AS 109 may include:

      (a)   the qualitative and quantitative factors considered in defining default;
      (b)   whether different definitions have been applied to different types of financial
            instruments; and
      (c) assumptions about the cure rate (ie the number of financial assets that return to
          a performing status) after a default occurred on the financial asset.

B8B   To assist users of financial statements in evaluating an entity's restructuring and
      modification policies, paragraph 35F(f)(i) requires the disclosure of information
      about how an entity monitors the extent to which the loss allowance on financial
      assets previously disclosed in accordance with paragraph 35F(f)(i) are
      subsequently measured at an amount equal to lifetime expected credit losses in
      accordance with paragraph 5.5.3 of Ind AS 109. Quantitative information that will
      assist users in understanding the subsequent increase in credit risk of modified
      financial assets may include information about modified financial assets meeting
      the criteria in paragraph 35F(f)(i) for which the loss allowance has reverted to
      being measured at an amount equal to lifetime expected credit losses (ie a
      deterioration rate).

B8C   Paragraph 35G(a) requires the disclosure of information about the basis of inputs
      and assumptions and the estimation techniques used to apply the impairment
      requirements in Ind AS 109. An entity's assumptions and inputs used to measure
      expected credit losses or determine the extent of increases in credit risk since
      initial recognition may include information obtained from internal historical
      information or rating reports and assumptions about the expected life of financial
      instruments and the timing of the sale of collateral.

      Changes in the loss allowance (paragraph 35H)

      B8D In accordance with paragraph 35H, an entity is required to explain the
          reasons for the changes in the loss allowance during the period. In addition
          to the reconciliation from the opening balance to the closing balance of the
          loss allowance, it may be necessary to provide a narrative explanation of the
      changes. This narrative explanation may include an analysis of the reasons
      for changes in the loss allowance during the period, including:

      (a)   the portfolio composition;

      (b)   the volume of financial instruments purchased or originated; and

      (c)   the severity of the expected credit losses

B8E For loan commitments and financial guarantee contracts the loss allowance
    is recognised as a provision. An entity should disclose information about the
    changes in the loss allowance for financial assets separately from those for
    loan commitments and financial guarantee contracts. However, if a financial
    instrument includes both a loan (ie financial asset) and an undrawn
    commitment (ie loan commitment) component and the entity cannot
    separately identify the expected credit losses on the loan commitment
    component from those on the financial asset component, the expected credit
    losses on the loan commitment should be recognised together with the loss
    allowance for the financial asset. To the extent that the combined expected
    credit losses exceed the gross carrying amount of the financial asset, the
    expected credit losses should be recognised as a provision.

Collateral (paragraph 35K)
B8F Paragraph 35K requires the disclosure of information that will enable users
     of financial statements to understand the effect of collateral and other credit
     enhancements on the amount of expected credit losses. An entity is neither
     required to disclose information about the fair value of collateral and other
     credit enhancements nor is it required to quantify the exact value of the
     collateral that was included in the calculation of expected credit losses (ie
     the loss given default).

B8G A narrative description of collateral and its effect on amounts of expected
    credit losses might include information about:

     (a) the main types of collateral held as security and other credit
         enhancements (examples of the latter being guarantees, credit
         derivatives and netting agreements that do not qualify for offset in
         accordance with Ind AS 32);

     (b) the volume of collateral held and other credit enhancements and its
         significance in terms of the loss allowance;

     (c) the policies and processes for valuing and managing collateral and other
         credit enhancements;
     (d) the main types of counterparties to collateral and other credit
         enhancements and their creditworthiness; and

     (e) information about risk concentrations within the collateral and other
         credit enhancements.

Credit risk exposure (paragraphs 35M­35N)
B8H Paragraph 35M requires the disclosure of information about an entity's
     credit risk exposure and significant concentrations of credit risk at the
     reporting date. A concentration of credit risk exists when a number of
     counterparties are located in a geographical region or are engaged in similar
     activities and have similar economic characteristics that would cause their
     ability to meet contractual obligations to be similarly affected by changes in
     economic or other conditions. An entity should provide information that
     enables users of financial statements to understand whether there are groups
     or portfolios of financial instruments with particular features that could
     affect a large portion of that group of financial instruments such as
     concentration to particular risks. This could include, for example, loan-to-
     value groupings, geographical, industry or issuer-type concentrations.

B8I The number of credit risk rating grades used to disclose the information in
    accordance with paragraph 35M shall be consistent with the number that the
    entity reports to key management personnel for credit risk management
    purposes. If past due information is the only borrower-specific information
    available and an entity uses past due information to assess whether credit
    risk has increased significantly since initial recognition in accordance with
    paragraph 5.5.10 of Ind AS 109, an entity shall provide an analysis by past
    due status for those financial assets.

B8J When an entity has measured expected credit losses on a collective basis, the
    entity may not be able to allocate the gross carrying amount of individual
    financial assets or the exposure to credit risk on loan commitments and
    financial guarantee contracts to the credit risk rating grades for which
    lifetime expected credit losses are recognised. In that case, an entity should
    apply the requirement in paragraph 35M to those financial instruments that
    can be directly allocated to a credit risk rating grade and disclose separately
    the gross carrying amount of financial instruments for which lifetime
    expected credit losses have been measured on a collective basis.

B9   Paragraphs 35K(a) and 36(a) require disclosure of the amount that best
     represents the entity's maximum exposure to credit risk. For a financial
     asset, this is typically the gross carrying amount, net of:
           (a) ...
           (b) any loss allowance recognised in accordance with Ind AS 109.

B10 Activities that give rise to credit risk and the associated maximum exposure
    to credit risk include, but are not limited to:

              (a)   granting loans to customers and placing deposits with other
                    entities. In these cases, the maximum exposure to credit risk
                    is the carrying amount of the related financial assets.

              (b)   ...

B22 Interest rate risk arises on interest-bearing financial instruments recognised
    in the balance sheet (eg debt instruments acquired or issued) and on some
    financial instruments not recognised in the balance sheet (eg some loan
    commitments).

B27 In accordance with paragraph 40(a), the sensitivity of profit or loss (that
    arises, for example, from instruments measured at fair value through profit
    or loss) is disclosed separately from the sensitivity of other comprehensive
    income (that arises, for example, from investments in equity instruments
    whose changes in fair value are presented in other comprehensive income).

C16     Deleted [Refer Appendix 1]


Ind AS 113 Fair Value Measurement

C20     Paragraph 52 is amended to read as follows:

        52    The exception in paragraph 48 applies only to financial assets,
              financial liabilities and other contracts within the scope of Ind AS
              109 Financial Instruments . The references to financial assets and
              financial liabilities in paragraphs 48­51 and 53­56 should be read
              as applying to all contracts within the scope of, and accounted for
              in accordance with, Ind AS 109 , regardless of whether they meet
              the definitions of financial assets or financial liabilities in Ind AS
              32 Financial Instruments: Presentation.


Ind AS 1 Presentation of Financial Statements

C22     In paragraph 7, the definition of `other comprehensive income' and
        paragraphs 68, 71, 82, 93, 95, 96, 106 and 123 are amended to read as
      follows:,

      7     The following terms are used in this Standard with the
            meanings specified:

            ...

            Other comprehensive income comprises items of income and
            expense (including reclassification adjustments) that are not
            recognised in profit or loss as required or permitted by other
            Ind ASs.

            The components of other comprehensive income include:

            (a)   ...

            (d)   gains and losses from investments in equity instruments
                  designated at fair value through other comprehensive income
                  in accordance with paragraph 5.7.5 of Ind AS 109 Financial
                  Instruments;

            (da) gains and losses on financial assets measured at fair value
                 through other comprehensive income in accordance with
                 paragraph 4.1.2A of Ind AS 109.

(e)       the effective portion of gains and losses on hedging instruments in a
          cash flow hedge and the gains and losses on hedging instruments that
          hedge investments in equity instruments measured at fair value
          through other comprehensive income in accordance with paragraph
          5.7.5 of Ind AS 109 (see Chapter 6 of Ind AS 109);

(f)       for particular liabilities designated as at fair value through profit or
          loss, the amount of the change in fair value that is attributable to
          changes in the liability's credit risk (see paragraph 5.7.7 of Ind AS
          109);

(g)       changes in the value of the time value of options when separating the
          intrinsic value and time value of an option contract and designating as
          the hedging instrument only the changes in the intrinsic value (see
          Chapter 6 of Ind AS 109);

(h)       changes in the value of the forward elements of forward contracts
          when separating the forward element and spot element of a forward
          contract and designating as the hedging instrument only the changes
           in the spot element, and changes in the value of the foreign currency
           basis spread of a financial instrument when excluding it from the
           designation of that financial instrument as the hedging instrument (see
           Chapter 6 of Ind AS 109);

     ...

68   The operating cycle of an entity is the time between the acquisition of assets
     for processing and their realisation in cash or cash equivalents. When the
     entity's normal operating cycle is not clearly identifiable, it is assumed to be
     twelve months. Current assets include assets (such as inventories and trade
     receivables) that are sold, consumed or realised as part of the normal
     operating cycle even when they are not expected to be realised within
     twelve months after the reporting period. Current assets also include assets
     held primarily for the purpose of trading (examples include some financial
     assets that meet the definition of held for trading in Ind AS 109) and the
     current portion of non-current financial assets.

71   Other current liabilities are not settled as part of the normal operating cycle,
     but are due for settlement within twelve months after the reporting period or
     held primarily for the purpose of trading. Examples are some financial
     liabilities that meet the definition of held for trading in Ind AS 109, bank
     overdrafts, and the current portion of non-current financial liabilities,
     dividends payable, income taxes and other non-trade payables. Financial
     liabilities that provide financing on a long-term basis (ie are not part of the
     working capital used in the entity's normal operating cycle) and are not due
     for settlement within twelve months after the reporting period are non-
     current liabilities, subject to paragraphs 74 and 75.

82   In addition to items required by other Ind ASs, the statement of profit
     or loss shall include line items that present the following amounts for
     the period:

     (a)   revenue, presenting separately interest revenue calculated using
           the effective interest method;

     (aa) gains and losses arising from the derecognition of financial assets
          measured at amortised cost;

     (b)   finance costs;

     (ba) impairment losses (including reversals of impairment losses or
          impairment gains) determined in accordance with Section 5.5 of
          Ind AS 109;
     (c)   share of the profit or loss of associates and joint ventures
           accounted for using the equity method;

     (ca) if a financial asset is reclassified out of the amortised cost
          measurement category so that it is measured at fair value through
          profit or loss, any gain or loss arising from a difference between
          the previous amortised cost of the financial asset and its fair value
          at the reclassification date (as defined in Ind AS 109);

     (cb) if a financial asset is reclassified out of the fair value through
          other comprehensive income measurement category so that it is
          measured at fair value through profit or loss, any cumulative gain
          or loss previously recognised in other comprehensive income that
          is reclassified to profit or loss;

     (d)   ...

93   Other Ind ASs specify whether and when amounts previously recognised in
     other comprehensive income are reclassified to profit or loss. Such
     reclassifications are referred to in this Standard as reclassification
     adjustments. A reclassification adjustment is included with the related
     component of other comprehensive income in the period that the adjustment
     is reclassified to profit or loss. These amounts may have been recognised in
     other comprehensive income as unrealised gains in the current or previous
     periods. Those unrealised gains must be deducted from other comprehensive
     income in the period in which the realised gains are reclassified to profit or
     loss to avoid including them in total comprehensive income twice.

95   Reclassification adjustments arise, for example, on disposal of a foreign
     operation (see Ind AS 21) and when some hedged forecast cash flow affect
     profit or loss (see paragraph 6.5.11(d) of Ind AS 109 in relation to cash flow
     hedges).

96   Reclassification adjustments do not arise on changes in revaluation surplus
     recognised in accordance with Ind AS 16 or Ind AS 38 or on
     remeasurements of defined benefit plans recognised in accordance with Ind
     AS 19. These components are recognised in other comprehensive income
     and are not reclassified to profit or loss in subsequent periods. Changes in
     revaluation surplus may be transferred to retained earnings in subsequent
     periods as the asset is used or when it is derecognised (see Ind AS 16 and
     Ind AS 38). In accordance with Ind AS 109, reclassification adjustments do
     not arise if a cash flow hedge or the accounting for the time value of an
     option (or the forward element of a forward contract or the foreign currency
     basis spread of a financial instrument) result in amounts that are removed
     from the cash flow hedge reserve or a separate component of equity,
     respectively, and included directly in the initial cost or other carrying
     amount of an asset or a liability. These amounts are directly transferred to
     assets or liabilities.

106 An entity shall present a statement of changes in equity as required by
    paragraph 10. The statement of changes in equity includes the following
    information:

     (a)   ...

     (c)   [deleted]

     (d)   for each component of equity, a reconciliation between the
           carrying amount at the beginning and the end of the period,
           separately (as a minimum) disclosing changes resulting from:

           (i)    profit or loss;

           (ii)   other comprehensive income; and

           (iii) transactions with owners in their capacity as owners,
                 showing separately contributions by and distributions to
                 owners and changes in ownership interests in subsidiaries
                 that do not result in a loss of control.
           ....

123 In the process of applying the entity's accounting policies, management
    makes various judgements, apart from those involving estimations, that can
    significantly affect the amounts it recognises in the financial statements. For
    example, management makes judgements in determining:

     (a)   [deleted]

     (b)   when substantially all the significant risks and rewards of ownership
           of financial assets and lease assets are transferred to other entities;

     (c)   whether, in substance, particular sales of goods are financing
           arrangements and therefore do not give rise to revenue; and

     (d)   whether the contractual terms of a financial asset give rise on
           specified dates to cash flows that are solely payments of principal and
           interest on the principal amount outstanding.
Ind AS 2 Inventories

C23     Paragraph 2 is amended to read as follows:

        2     This Standard applies to all inventories, except:

              (a)   [deleted]

              (b)   financial instruments (see Ind AS 32 Financial
                    Instruments: Presentation and Ind AS 109 Financial
                    Instruments); and

              (c)   ...


Ind AS 8 Accounting Policies, Changes in Accounting Estimates and
Errors

C24     Paragraph 53 is amended to read as follows:

        53    Hindsight should not be used when applying a new accounting
              policy to, or correcting amounts for, a prior period, either in
              making assumptions about what management's intentions would
              have been in a prior period or estimating the amounts recognised,
              measured or disclosed in a prior period. For example, when an
              entity corrects a prior period error in calculating its liability for
              employees' accumulated sick leave in accordance with Ind AS 19
              Employee Benefits, it disregards information about an unusually
              severe influenza season during the next period that became
              available after the financial statements for the prior period were
              authorised for issue. The fact that significant estimates are
              frequently required when amending comparative information
              presented for prior periods does not prevent reliable adjustment or
              correction of the comparative information.


Ind AS 10 Events after the Reporting Period

C25     Paragraph 9 is amended to read as follows:

        9     The following are examples of adjusting events after the reporting
              period that require an entity to adjust the amounts recognised in its
              financial statements, or to recognise items that were not previously
              recognised:
            (a)   ...

            (b)   the receipt of information after the reporting period
                  indicating that an asset was impaired at the end of the
                  reporting period, or that the amount of a previously
                  recognised impairment loss for that asset needs to be
                  adjusted. For example:

                  (i)    the bankruptcy of a customer that occurs after the
                         reporting period usually confirms that the customer was
                         credit-impaired at the end of the reporting period;


Ind AS 12 Income Taxes

C26    Paragraph 20 is amended to read as follows:

       20   Ind ASs permit or require certain assets to be carried at fair value
            or to be revalued (see, for example, Ind AS 16 Property, Plant and
            Equipment, Ind AS 38 Intangible Assets, and Ind AS 109 Financial
            Instruments). In some jurisdictions, the revaluation or other
            restatement of an asset to fair value affects taxable profit (tax loss)
            for the current period. As a result, the tax base of the asset is
            adjusted and no temporary difference arises. In other jurisdictions,
            the revaluation or restatement of an asset does not affect taxable
            profit in the period of the revaluation or restatement and,
            consequently, the tax base of the asset is not adjusted.
            Nevertheless, the future recovery of the carrying amount will result
            in a taxable flow of economic benefits to the entity and the amount
            that will be deductible for tax purposes will differ from the amount
            of those economic benefits. The difference between the carrying
            amount of a revalued asset and its tax base is a temporary
            difference and gives rise to a deferred tax liability or asset. This is
            true even if:

            (a)   ...
Ind AS 17 Leases

Appendix B
Evaluating the Substance of Transactions Involving the Legal Form of a
Lease

C57    Paragraph 7 is amended to read as follows:

       7     Other obligations of an arrangement, including any guarantees
             provided and obligations incurred upon early termination, shall be
             accounted for under Ind AS 37 Provisions, Contingent Liabilities
             and Contingent Assets, Ind AS 104 Insurance Contracts or Ind AS
             109 Financial Instruments, depending on the terms.


Ind AS 20 Accounting for Government Grants and Disclosure of
Government Assistance

C27    Paragraph 10A is amended to read as follows:

       10A The benefit of a government loan at a below-market rate of interest
           is treated as a government grant. The loan shall be recognised and
           measured in accordance with Ind AS 109 Financial Instruments.
           The benefit of the below-market rate of interest shall be measured
           as the difference between the initial carrying value of the loan
           determined in accordance with Ind AS 109 and the proceeds
           received. The benefit is accounted for in accordance with this
           Standard. The entity shall consider the conditions and obligations
           that have been, or must be, met when identifying the costs for
           which the benefit of the loan is intended to compensate.




Ind AS 21 The Effects of Changes in Foreign Exchange Rates

C28

C29   Paragraphs 3, 4, 5, 27 and 52 are amended to read as follows:

       3     This Standard shall be applied:

             (a)   in accounting for transactions and balances in foreign
                   currencies, except for those derivative transactions and
                   balances that are within the scope of Ind AS 109
                  Financial Instruments;

            (b)   ...

       4    Ind AS 109 applies to many foreign currency derivatives and,
            accordingly, these are excluded from the scope of this Standard.
            However, those foreign currency derivatives that are not within the
            scope of Ind AS 109 (eg some foreign currency derivatives that are
            embedded in other contracts) are within the scope of this Standard.
            In addition, this Standard applies when an entity translates amounts
            relating to derivatives from its functional currency to its
            presentation currency.

       5    This Standard does not apply to hedge accounting for foreign
            currency items, including the hedging of a net investment in a
            foreign operation. Ind AS 109 applies to hedge accounting.

       27   As noted in paragraphs 3(a) and 5, Ind AS 109 applies to hedge
            accounting for foreign currency items. The application of hedge
            accounting requires an entity to account for some exchange
            differences differently from the treatment of exchange differences
            required by this Standard. For example, Ind AS 109 requires that
            exchange differences on monetary items that qualify as hedging
            instruments in a cash flow hedge are recognised initially in other
            comprehensive income to the extent that the hedge is effective.

       52   An entity shall disclose:

            (a)   the amount of exchange differences recognised in profit
                  or loss except for those arising on financial instruments
                  measured at fair value through profit or loss in
                  accordance with Ind AS 109; and

            (b)   ...

            (c)   ...


Ind AS 23 Borrowing Costs

C30    Paragraph 6 is amended to read as follows:

       6    Borrowing costs may include:
                     (a)   interest expense calculated using the effective interest
                           method as described in Ind AS 109;

                     (b)   ...




      Ind AS 28 Investments in Associates and Joint Ventures

C31   Paragraphs 40­42 are amended to read as follows, and paragraphs 41A­              41C
      are added:

      40    After application of the equity method, including recognising the associate's
            or joint venture's losses in accordance with paragraph 38, the entity applies
            paragraphs 41A­41C to determine whether there is any objective evidence
            that its net investment in the associate or joint venture is impaired.

      41    The entity applies the impairment requirements in Ind AS 109 to its other
            interests in the associate or joint venture that are in the scope of Ind AS 109
            and that do not constitute part of the net investment.

      41A The net investment in an associate or joint venture is impaired and
          impairment losses are incurred if, and only if, there is objective evidence of
          impairment as a result of one or more events that occurred after the initial
          recognition of the net investment (a `loss event') and that loss event (or
          events) has an impact on the estimated future cash flows from the net
          investment that can be reliably estimated. It may not be possible to identify
          a single, discrete event that caused the impairment. Rather the combined
          effect of several events may have caused the impairment. Losses expected
          as a result of future events, no matter how likely, are not recognised.
          Objective evidence that the net investment is impaired includes observable
          data that comes to the attention of the entity about the following loss events:

            (a)   significant financial difficulty of the associate or joint venture;

            (b)   a breach of contract, such as a default or delinquency in payments by
                  the associate or joint venture;

            (c)   the entity, for economic or legal reasons relating to its associate's or
                  joint venture's financial difficulty, granting to the associate or joint
                  venture a concession that the entity would not otherwise consider;

            (d)   it becoming probable that the associate or joint venture will enter
                  bankruptcy or other financial reorganisation; or
      (e)   the disappearance of an active market for the net investment because
            of financial difficulties of the associate or joint venture.

41B The disappearance of an active market because the associate's or joint
    venture's equity or financial instruments are no longer publicly traded is not
    evidence of impairment. A downgrade of an associate's or joint venture's
    credit rating or a decline in the fair value of the associate or joint venture, is
    not of itself, evidence of impairment, although it may be evidence of
    impairment when considered with other available information.

41C In addition to the types of events in paragraph 41A, objective evidence of
    impairment for the net investment in the equity instruments of the associate
    or joint venture includes information about significant changes with an
    adverse effect that have taken place in the technological, market, economic
    or legal environment in which the associate or joint venture operates, and
    indicates that the cost of the investment in the equity instrument may not be
    recovered. A significant or prolonged decline in the fair value of an
    investment in an equity instrument below its cost is also objective evidence
    of impairment.

42    Because goodwill that forms part of the carrying amount of the net
      investment in an associate or a joint venture is not separately recognised, it
      is not tested for impairment separately by applying the requirements for
      impairment testing goodwill in Ind AS 36 Impairment of Assets. Instead,
      the entire carrying amount of the investment is tested for impairment in
      accordance with Ind AS 36 as a single asset, by comparing its recoverable
      amount (higher of value in use and fair value less costs to sell) with its
      carrying amount whenever application of paragraphs 41A­41C indicates
      that the net investment may be impaired. An impairment loss recognised in
      those circumstances is not allocated to any asset, including goodwill, that
      forms part of the carrying amount of the net investment in the associate or
      joint venture. Accordingly, any reversal of that impairment loss is
      recognised in accordance with Ind AS 36 to the extent that the recoverable
      amount of the net investment subsequently increases. In determining the
      value in use of the net investment, an entity estimates:

      (a)    its share of the present value of the estimated future cash flows
             expected to be generated by the associate or joint venture, including
             the cash flows from the operations of the associate or joint venture
             and the proceeds from the ultimate disposal of the investment; or

      (b)    the present value of the estimated future cash flows expected to arise
             from dividends to be received from the investment and from its
                    ultimate disposal.

              Using appropriate assumptions, both methods give the same result.


      Ind AS 32 Financial Instruments: Presentation

C32   Deleted [Refer Appendix 1]

C33   Paragraphs 3, 4, 8, 12, 23, 31 and 42 are amended to read as follows:

      3     The principles in this Standard complement the principles for recognising
            and measuring financial assets and financial liabilities in Ind AS 109
            Financial Instruments, and for disclosing information about them in Ind AS
            107 Financial Instruments: Disclosures.

      Scope

      4     This Standard shall be applied by all entities to all types of financial
            instruments except:

            (a)    those interests in subsidiaries, associates or joint ventures that are
                   accounted for in accordance with Ind AS 110

                   Consolidated Financial Statements, Ind AS 27 Separate Financial
                   Statements or Ind AS 28 Investments in Associates and Joint
                   Ventures. However, in some cases, Ind AS 110, Ind AS 27 or Ind
                   AS 28 require or permit an entity to account for an interest in a
                   subsidiary, associate or joint venture using Ind AS 109; in those
                   cases, entities shall apply the requirements of this Standard.
                   Entities shall also apply this Standard to all derivatives linked to
                   interests in subsidiaries, associates or joint ventures.

            (b)    ...

            (d)    insurance contracts as defined in Ind AS 104 Insurance Contracts.
                   However, this Standard applies to derivatives that are embedded
                   in insurance contracts if Ind AS 109 requires the entity to account
                   for them separately. Moreover, an issuer shall apply this Standard
                   to financial guarantee contracts if the issuer applies Ind AS 109 in
                   recognising and measuring the contracts, but shall apply Ind AS
                   104 if the issuer elects, in accordance with paragraph 4(d) of Ind
                   AS 104, to apply Ind AS 104 in recognising and measuring them.
     (e)   financial instruments that are within the scope of Ind AS 104
           because they contain a discretionary participation feature. The
           issuer of these instruments is exempt from applying to these
           features paragraphs 15­32 and AG25­AG35 of this Standard
           regarding the distinction between financial liabilities and equity
           instruments. However, these instruments are subject to all other
           requirements of this Standard. Furthermore, this Standard
           applies to derivatives that are embedded in these instruments (see
           Ind AS 109).
     (f)   ...

8    This Standard shall be applied to those contracts to buy or sell a non-
     financial item that can be settled net in cash or another financial
     instrument, or by exchanging financial instruments, as if the contracts
     were financial instruments, with the exception of contracts that were
     entered into and continue to be held for the purpose of the receipt or
     delivery of a non-financial item in accordance with the entity's expected
     purchase, sale or usage requirements. However, this Standard shall be
     applied to those contracts that an entity designates as measured at fair
     value through profit or loss in accordance with paragraph 2.5 of Ind AS
     109

     Financial Instruments.

12   The following terms are defined in Appendix A of Ind AS 109 and are used
     in this Standard with the meaning specified in Ind AS 109.

           amortised cost of a financial asset or financial liability

           derecognition

           derivative

           effective interest method

           financial guarantee contract

           financial liability at fair value through profit or loss

           firm commitment

           forecast transaction

           hedge effectiveness
           hedged item

           hedging instrument

           held for trading

           regular way purchase or sale

           transaction costs.

23   With the exception of the circumstances described in paragraphs 16A and
     16B or paragraphs 16C and 16D, a contract that contains an obligation for
     an entity to purchase its own equity instruments for cash or another
     financial asset gives rise to a financial liability for the present value of the
     redemption amount (for example, for the present value of the forward
     repurchase price, option exercise price or other redemption amount). This is
     the case even if the contract itself is an equity instrument. One example is
     an entity's obligation under a forward contract to purchase its own equity
     instruments for cash. The financial liability is recognised initially at the
     present value of the redemption amount, and is reclassified from equity.
     Subsequently, the financial liability is measured in accordance with Ind AS
     109. If the contract expires without delivery, the carrying amount of the
     financial liability is reclassified to equity. An entity's contractual obligation
     to purchase its own equity instruments gives rise to a financial liability for
     the present value of the redemption amount even if the obligation to
     purchase is conditional on the counterparty exercising a right to redeem (eg
     a written put option that gives the counterparty the right to sell an entity's
     own equity instruments to the entity for a fixed price).

31   Ind AS 109 deals with the measurement of financial assets and financial
     liabilities. Equity instruments are instruments that evidence a residual
     interest in the assets of an entity after deducting all of its liabilities.
     Therefore, when the initial carrying amount of a compound financial
     instrument is allocated to its equity and liability components, the equity
     component is assigned the residual amount after deducting from the fair
     value of the instrument as a whole the amount separately determined for the
     liability component. The value of any derivative features (such as a call
     option) embedded in the compound financial instrument other than the
     equity component (such as an equity conversion option) is included in the
     liability component. The sum of the carrying amounts assigned to the
     liability and equity components on initial recognition is always equal to the
     fair value that would be ascribed to the instrument as a whole. No gain or
     loss arises from initially recognising the components of the instrument
             separately.

      42     A financial asset and a financial liability shall be offset and the net
             amount presented in the balance sheet when, and only when, an entity:

             (a)           ...

             In accounting for a transfer of a financial asset that does not qualify
             for derecognition, the entity shall not offset the transferred asset and
             the associated liability (see Ind AS 109, paragraph 3.2.22).


C34    In the Appendix, paragraphs AG2 and AG30 are amended to read as follows:

               AG2 The Standard does not deal with the recognition or measurement of
                   financial instruments. Requirements about the recognition and
                   measurement of financial assets and financial liabilities are set out
                   in Ind AS 109.

               AG30        Paragraph 28 applies only to issuers of non-derivative
                   compound financial instruments. Paragraph 28 does not deal with
                   compound financial instruments from the perspective of holders.
                   Ind AS 109 deals with the classification and measurement of
                   financial assets that are compound financial instruments from the
                   holder's perspective.


       Ind AS 33 Earnings per Share

C35    Paragraph 34 is amended to read as follows:

               34    After the potential ordinary shares are converted into ordinary
                     shares, the items identified in paragraph 33(a)­(c) no longer arise.
                     Instead, the new ordinary shares are entitled to participate in profit
                     or loss attributable to ordinary equity holders of the parent entity.
                     Therefore, profit or loss attributable to ordinary equity holders of
                     the parent entity calculated in accordance with paragraph 12 is
                     adjusted for the items identified in paragraph 33(a)­(c) and any
                     related taxes. The expenses associated with potential ordinary
                     shares include transaction costs and discounts accounted for in
                     accordance with the effective interest method (see Ind AS 109).


       Ind AS 34 Interim Financial Reporting
      Appendix A Interim Financial Reporting and Impairment

C51          Paragraphs 1, 2, 7 and 8 are amended to read as follows, paragraphs 5
             and 6are deleted:

             1     An entity is required to assess goodwill for impairment at the end
                   of each reporting period, and, if required, to recognise an
                   impairment loss at that date in accordance with Ind AS 36.
                   However, at the end of a subsequent reporting period, conditions
                   may have so changed that the impairment loss would have been
                   reduced or avoided had the impairment assessment been made only
                   at that date. This Interpretation provides guidance on whether such
                   impairment losses should ever be reversed.

             2     The Interpretation addresses the interaction between the
                   requirements of Ind AS 34 and the recognition of impairment
                   losses on goodwill in Ind AS 36, and the effect of that interaction
                   on subsequent interim and annual financial statements.

             5     [Deleted]

             6     [Deleted]

             7     The Interpretation addresses the following issue:

                   Should an entity reverse impairment losses recognised in an interim
                   period on goodwill if a loss would not have been recognised, or a
                   smaller loss would have been recognised, had an impairment
                   assessment been made only at the end of a subsequent reporting
                   period?

                   Consensus

              8    An entity shall not reverse an impairment loss recognised in a
                   previous interim period in respect of goodwill.




      Ind AS 36 Impairment of Assets

      C36    Paragraphs 2, 4 and 5 are amended to read as follows:

              2    This Standard shall be applied in accounting for the
                   impairment of all assets, other than:
              (a)   ...

              (e)   financial assets that are within the scope of Ind AS 109
                    Financial Instruments;

              (f)   ...

        4     This Standard applies to financial assets classified as:

              (a)   subsidiaries, as defined in Ind AS 110 Consolidated
                    Financial Statements;

              (b)   associates, as defined in Ind AS 28 Investments in Associates
                    and Joint Ventures; and

              (c)   joint ventures, as defined in Ind AS 111 Joint Arrangements.

              For impairment of other financial assets, refer to Ind AS 109.

        5     This Standard does not apply to financial assets within the scope of
              Ind AS 109, investment property measured at fair value within the
              scope of Ind AS 40, or biological assets related to agricultural
              activity measured at fair value less costs to sell within the scope of
              Ind AS 41. However, this Standard applies to assets that are carried
              at revalued amount (ie fair value at the date of the revaluation less
              any subsequent accumulated depreciation and subsequent
              accumulated impairment losses) in accordance with other Ind ASs,
              such as the revaluation model in Ind AS 16 Property, Plant and
              Equipment and Ind AS 38 Intangible Assets. The only difference
              between an asset's fair value and its fair value less costs of disposal
              is the direct incremental costs attributable to the disposal of the
              asset.

              (a)   ...


Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets

C37     Paragraph 2 is amended to read as follows:

        2     This Standard does not apply to financial instruments (including
              guarantees) that are within the scope of Ind AS 109 Financial
              Instruments.
Appendix A
Rights to Interests arising from Decommissioning, Restoration and
Environmental Rehabilitation Funds

C50             Paragraph 5 is amended to read as follows:

                 5           A residual interest in a fund that extends beyond a right to
                             reimbursement, such as a contractual right to distributions once all
                             the decommissioning has been completed or on winding up the
                             fund, may be an equity instrument within the scope of Ind AS 109
                             and is not within the scope of this Interpretation.


IAS 39 Financial Instruments: Recognition and Measurement


Appendix D Hedges of a Net Investment in a Foreign Operation6

C53              A reference to Ind AS 109 Financial Instruments is added under the
                 heading `References'.

C54              Paragraphs 3, 5­7, 14 and 16 are amended to read as follows, paragraph
                 18A is deleted and paragraph 18B is added:

3          Ind AS 109 requires the designation of an eligible hedged item and eligible
           hedging instruments in a hedge accounting relationship. If there is a
           designated hedging relationship, in the case of a net investment hedge, the
           gain or loss on the hedging instrument that is determined to be an effective
           hedge of the net investment is recognised in other comprehensive income
           and is included with the foreign exchange differences arising on translation
           of the results and financial position of the foreign operation.

5          Ind AS 109 allows an entity to designate either a derivative or a non-
           derivative financial instrument (or a combination of derivative and non-
           derivative financial instruments) as hedging instruments for foreign
           currency risk. This Interpretation provides guidance on where, within a
           group, hedging instruments that are hedges of a net investment in a foreign
           operation can be held to qualify for hedge accounting.


                                                            
6
  Appendix D Hedges of a Net Investment in a Foreign Operation will be shifted to Ind AS 109 as 
appendix D 
      6    Ind AS 21 and Ind AS 109 require cumulative amounts recognised in other
           comprehensive income relating to both the foreign exchange differences
           arising on translation of the results and financial position of the foreign
           operation and the gain or loss on the hedging instrument that is determined
           to be an effective hedge of the net investment to be reclassified from equity
           to profit or loss as a reclassification adjustment when the parent disposes of
           the foreign operation. This Interpretation provides guidance on how an
           entity should determine the amounts to be reclassified from equity to profit
           or loss for both the hedging instrument and the hedged item.

      7    This Interpretation applies to an entity that hedges the foreign currency risk
           arising from its net investments in foreign operations and wishes to qualify
           for hedge accounting in accordance with Ind AS 9. For convenience this
           Interpretation refers to such an entity as a parent entity and to the financial
           statements in which the net assets of foreign operations are included as
           consolidated financial statements. All references to a parent entity apply
           equally to an entity that has a net investment in a foreign operation that is a
           joint venture, an associate or a branch.

      14   A derivative or a non-derivative instrument (or a combination of derivative
           and non-derivative instruments) may be designated as a hedging instrument
           in a hedge of a net investment in a foreign operation. The hedging
           instrument(s) may be held by any entity or entities within the group, as long
           as the designation, documentation and effectiveness requirements of Ind AS
           9 paragraph 6.4.1 that relate to a net investment hedge are satisfied. In
           particular, the hedging strategy of the group should be clearly documented
           because of the possibility of different designations at different levels of the
           group.

      16   When a foreign operation that was hedged is disposed of, the amount
           reclassified to profit or loss as a reclassification adjustment from the foreign
           currency translation reserve in the consolidated financial statements of the
           parent in respect of the hedging instrument is the amount that Ind AS 109
           paragraph 6.5.14 requires to be identified. That amount is the cumulative
           gain or loss on the hedging instrument that was determined to be an
           effective hedge.

      18A [Deleted]

              18B Ind AS 109, as issued in July 2014, amended paragraphs 3, 5­7, 14,
                  16, AG1 and AG8 and deleted paragraph 18A. An entity shall
                  apply those amendments when it applies Ind AS 109.

C55   In the Appendix, paragraphs AG1 and AG8 are amended to read as follows:
              AG1     This appendix illustrates the application of the Interpretation using
                      the corporate structure illustrated below. In all cases the hedging
              relationships described would be tested for effectiveness in accordance
              with Ind AS 109, although this testing is not discussed in this
              appendix. Parent, being the ultimate parent entity, presents its consolidated
              financial statements in its functional currency of euro (EUR). Each of the
              subsidiaries is wholly owned. Parent's £500 million net investment in
              Subsidiary B (functional currency pounds sterling (GBP)) includes the
              £159 million equivalent of Subsidiary B's US$300 million net investment
              in Subsidiary C (functional currency US dollars (USD)). In other words,
              Subsidiary B's net assets other than its investment in Subsidiary C are
              £341 million.

AG8           When Subsidiary C is disposed of, the amounts reclassified to profit or
              loss in Parent's consolidated financial statements from its foreign currency
              translation reserve (FCTR) are:

                      (a) in respect of the US$300 million external borrowing of Subsidiary
                          A, the amount that Ind AS 109 requires to be identified, ie the total
                          change in value in respect of foreign exchange risk that was
                          recognised in other comprehensive income as the effective portion
                          of the hedge; and
                      (b) ...


Appendix E Extinguishing Financial Liabilities with Equity
Instruments7

C56               Paragraphs 4, 5, 7, 9 and 10 are amended to read as follows:

                 4           This Interpretation addresses the following issues:

                             (a)        Are an entity's equity instruments issued to extinguish all or
                                        part of a financial liability `consideration paid' in accordance
                                        with paragraph 3.3.3 of Ind AS 109?

                             (b)        ...

                 Consensus


                                                            
7
  Appendix E Extinguishing Financial Liabilities with Equity Instruments will be shifted to Ind AS 
109 as appendix D 
                 5           The issue of an entity's equity instruments to a creditor to
                             extinguish all or part of a financial liability is consideration paid in
                             accordance with paragraph 3.3.3 of Ind AS 109. An entity shall
                             remove a financial liability (or part of a financial liability) from its
                             balance sheet when, and only when, it is extinguished in
                             accordance with paragraph 3.3.1 of Ind AS 109.

                 7           If the fair value of the equity instruments issued cannot be reliably
                             measured then the equity instruments shall be measured to reflect
                             the fair value of the financial liability extinguished. In measuring
                             the fair value of a financial liability extinguished that includes a
                             demand feature (eg a demand deposit), paragraph 47 of Ind AS 113
                             is not applied.

                 9           The difference between the carrying amount of the financial
                             liability (or part of a financial liability) extinguished, and the
                             consideration paid, shall be recognised in profit or loss, in
                             accordance with paragraph 3.3.3 of Ind AS 109. The equity
                             instruments issued shall be recognised initially and measured at the
                             date the financial liability (or part of that liability) is extinguished.

                 10          When only part of the financial liability is extinguished,
                             consideration shall be allocated in accordance with paragraph 8.
                             The consideration allocated to the remaining liability shall form
                             part of the assessment of whether the terms of that remaining
                             liability have been substantially modified. If the remaining liability
                             has been substantially modified, the entity shall account for the
                             modification as the extinguishment of the original liability and the
                             recognition of a new liability as required by paragraph 3.3.2 of Ind
                             AS 109.

                 14         [Deleted]

Ind AS 1Construction Contracts8
Appendix A Service Concession Arrangements

C52              Paragraphs 23­25 are amended to read as follows, paragraphs 28A­28C
                 are deleted and paragraph 28E is added:

                 23          Ind AS 32 and IFRSs 107 and 109 apply to the financial asset

                                                            
8
  Ind AS 11 will be superseded by Ind AS 115, Revenue from Contracts with Costumers. Ind AS 115 
is under formulation. Appendix A to Ind AS 11 is proposed to be moved to Ind AS 115 as Appendix 
C.   
     recognised under paragraphs 16 and 18.

24   The amount due from or at the direction of the grantor is accounted
     for in accordance with Ind AS 109 as measured at:

     (a)   amortised cost;

     (b)   fair value through other comprehensive income; or

     (c)   fair value through profit or loss.

25   If the amount due from the grantor is measured at amortised cost
     or fair value through other comprehensive income, Ind AS 109
     requires interest calculated using the effective interest method to
     be recognised in profit or loss.

 
 
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