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            COMMISSION REGULATION (EC) No 2086/2004

of 19 November 2004         

amending Regulation (EC) No 1725/2003 on the adoption of certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards the insertion of IAS 39

(Text with EEA relevance)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community,

Having regard to Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards (1), and in particular Article 3(1) thereof,

Whereas:

HAS ADOPTED THIS REGULATION:

Article 1

1.   International Accounting Standard (IAS) 39 Financial Instruments: Recognition and Measurement, with the exception of certain of its provisions on the use of the fair value option and certain of its provisions relating to hedge accounting, is inserted in the Annex to Regulation (EC) No 1725/2003.

The text for insertion, as referred to in the first subparagraph, is set out in the Annex to this Regulation.

2.   Companies shall be regarded as ‘first time adopters’ in accordance with paragraph 1. References in IFRS 1 to IAS/IFRS shall be construed as references to IAS/IFRS as adopted by the Commission on the basis of Regulation (EC) No 1606/2002.

3.   IAS 12, 18, 19, 30, 36 and 37 and SIC-27 as well as International Financial Reporting Standard No 1 are amended in accordance with Appendix B of IAS 39, as set out in the Annex to this Regulation.

Article 2

This Regulation shall enter into force on the 20th day following that of its publication in the Official Journal of the European Union.

It shall apply from 1 January 2005 at the latest.

Done at Brussels, 19 November 2004.

For the Commission

Frederik BOLKESTEIN            

Member of the Commission

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(1)OJ L 243, 11.9.2002, p. 1.

(2)OJ L 261, 13.10.2003, p. 1. Regulation as amended by Regulation (EC) No 707/2004 (OJ L 111, 17.4.2004, p. 3)

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ANNEX

INTERNATIONAL ACCOUNTING STANDARDS
IAS
Title

Reproduction allowed within the European Economic Area. All existing rights reserved outside the EEA, with the exception of the right to reproduce for the purposes of personal use or other fair dealing. Further information can be obtained from the IASB at www.iasb.org.uk

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INTERNATIONAL ACCOUNTING STANDARD 39

Financial Instruments: Recognition and Measurement

SUMMARY

This revised Standard supersedes IAS 39 (revised 2000) Financial Instruments: Recognition and Measurement and should be applied for annual periods beginning on or after 1 January 2005. Earlier application is permitted.

OBJECTIVE

SCOPE

DEFINITIONS

EMBEDDED DERIVATIVES

RECOGNITION AND DERECOGNITION

Initial Recognition

Derecognition of a Financial Asset

Transfers that Qualify for Derecognition

(see paragraph 20(a) and (c)(i))

Transfers that Do Not Qualify for Derecognition

(see paragraph 20(b))

Continuing Involvement in Transferred Assets

(see paragraph 20(c)(ii))

All Transfers

Regular Way Purchase or Sale of a Financial Asset

Derecognition of a Financial Liability

MEASUREMENT

Initial Measurement of Financial Assets and Financial Liabilities

Subsequent Measurement of Financial Assets

Subsequent Measurement of Financial Liabilities

Fair Value Measurement Considerations

Reclassifications

Gains and Losses

Impairment and Uncollectibility of Financial Assets

Financial Assets Carried at Amortised Cost

Financial Assets Carried at Cost

Available-for-Sale Financial Assets

HEDGING

Hedging Instruments

Qualifying Instruments

Designation of Hedging Instruments

Hedged Items

Qualifying Items

Designation of Financial Items as Hedged Items

Designation of Non-Financial Items as Hedged Items

Designation of Groups of Items as Hedged Items

Hedge Accounting

Fair Value Hedges

Cash Flow Hedges

Hedges of a Net Investment

EFFECTIVE DATE AND TRANSITIONAL PROVISIONS

WITHDRAWAL OF OTHER PRONOUNCEMENTS

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(*1)  Paragraphs 48, 49 and AG69-AG82 of Appendix A contain requirements for determining the fair value of a financial asset or financial liability.

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APPENDIX A

Application Guidance

This appendix is an integral part of the Standard.

Scope (paragraphs 2-7)

Definitions (paragraphs 8-9)

Effective Interest Rate

Derivatives

Transaction Costs

Financial Assets and Financial Liabilities Held for Trading

Held-to-Maturity Investments

Loans and Receivables

Embedded Derivatives (paragraphs 10-13)

Recognition and Derecognition (paragraphs 14-42)

Initial Recognition (paragraph 14)

Derecognition of a Financial Asset (paragraphs 15-37)

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 18(b))

Evaluation of the transfer of risks and rewards of ownership (paragraph 20)

Evaluation of the transfer of control

Transfers that Qualify for Derecognition

Transfers that Do Not Qualify for Derecognition

Continuing Involvement in Transferred Assets

All Transfers

Examples

Regular Way Purchase or Sale of a Financial Asset (paragraph 38)

Derecognition of a Financial Liability (paragraphs 39-42)

Measurement (paragraphs 43-70)

Initial Measurement of Financial Assets and Financial Liabilities (paragraph 43)

Subsequent Measurement of Financial Assets (paragraphs 45 and 46)

Fair Value Measurement Considerations (paragraphs 48 and 49)

Active Market: Quoted Price

No Active Market: Valuation Technique

No Active Market: Equity Instruments

Inputs to Valuation Techniques

Gains and Losses (paragraphs 55-57)

Impairment and Uncollectibility of Financial Assets (paragraphs 58-70)

Financial Assets Carried at Amortised Cost (paragraphs 63-65)

Interest Income After Impairment Recognition

Hedging (paragraphs 71-102)

Hedging Instruments (paragraphs 72-77)

Qualifying Instruments (paragraphs 72 and 73)

Hedged Items (paragraphs 78-84)

Qualifying Items (paragraphs 78-80)

Designation of Financial Items as Hedged Items (paragraphs 81 and 81A)

Designation of Non-Financial Items as Hedged Items (paragraph 82)

Designation of Groups of Items as Hedged Items (paragraphs 83 and 84)

Hedge Accounting (paragraphs 85-102)

Assessing Hedge Effectiveness

Fair Value Hedge Accounting for a Portfolio Hedge of Interest Rate Risk

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(*1)  In this Standard, monetary amounts are denominated in ‘currency units’ (CU).

(*2)  IAS 37, paragraph 39 contains guidance on how to determine the best estimate in a range of possible outcomes.

(*3)  The same materiality considerations apply in this context as apply throughout IFRSs.

(*4)  The Standard permits an entity to designate any amount of the available qualifying assets or liabilities, ie in this example any amount of assets between CU0 and CU100.

(*5)  see paragraphs 77 and AG94

(*6)  see paragraph 75

(*7)  The same materiality considerations apply in this context as apply throughout IFRSs.

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APPENDIX B

Amendments to Other Pronouncements

The amendments in this appendix shall be applied for annual periods beginning on or after 1 January 2005. If an entity applies this Standard for an earlier period, these amendments shall be applied for that earlier period.

Amendments to IFRS 1

Appendix A

The following definition is added:

Amendments to IAS 12

Amendments to IAS 18

Amendments to IAS 19

Amendments to IAS 30

Amendments to IAS 32

Amendments to IAS 36

Amendments to IAS 37

Amendments to SIC 27

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