Document ID: chunk:federal_register_of_legislation:F2022L00227:body:0:p8
Version: federal_register_of_legislation:F2022L00227
Segment Type: other
Provision Reference: 
Character Range: 21020–24025

which they arise. For foreign currency derivatives, the exchange differences would be recognised immediately in profit and loss if the hedging instrument is a fair value hedge. For derivatives used in a cash flow hedge, the exchange differences should be recognised directly in equity.

    The ineffective portion of the exchange differences in all hedges would be recognised in profit and loss.

    4.             translation of financial reports of foreign operations.

    A foreign operation is defined in AASB 121 as meaning an entity that is a subsidiary, associate, joint venture or branch of a reporting entity, the activities of which are based or conducted in a country or currency other than those of the reporting entity.

         * Exchange differences relating to foreign currency monetary items that form part of the net investment of an entity in a foreign operation, must be recognised as a separate component of equity.

         * Translation of financial reports should otherwise follow the requirements in AASB 121.

Netting

Amounts should be reported without any adjustment for netting arrangements.

Reporting threshold

Bank ADIs:

For the purposes of this report, only include commercial property exposures which exceed AUD $250,000.

Non-bank ADIs:

For the purposes of this report, include total commercial property exposures irrespective of the dollar amount.

Definition

Commercial property exposure is defined according to the nature of the risk. An exposure should be classified as commercial property risk, if the exposure is subject to the performance of the property market.

For reporting purposes, a commercial property exposure exists when a facility has been provided for the development, acquisition or improvement of landed property (real estate), and the servicing and repayment of the facility is dependent on the cash flows generated by the property itself through sale or rental income, and/or from cash flows generated from other properties owned by the borrower.

The following points may assist to further clarify this general definition:

     * The definition excludes residential property loans for owner occupation and loans to individuals or families for investment in residential property.

     * Exclude loans to private family companies and/or family trusts where the residence is occupied by the directors or principal beneficiaries of the family trust.

     * Exclude loans to builders, construction companies or sub-contractors who are paid for the execution of their contracts by a third party and not out of the sale or rental of the property upon completion. If, however, they assume development risk, whether recognised as a developer or not, the exposure is classified as property exposure.

     * Rural exposures will generally not meet the definition of commercial property, unless the property has been acquired specifically for lease or resale, and where the servicing of the debt is dependent on such lease or