Fair Value Accruals - IFRS9

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Introduction

IFRS-9 is a set of International Financial Reporting Standards proposed by the International Accounting standards Board.  IFRS-9 requires booking the valuation of commodity contracts and inventory to accounting before they are sold ("realized").  Fair Value

In Agiblocks, Fair Value consists of 2 components:

 

1.The Contract Value of each contractual and inventory quantity, which is represented by all its cost items.
2.The Market Value of each contract or inventory quantity.  This is the market value based on current market data and currency rates.  For this a new cost item called Market Value has been added to all cost sheets.  The price for this cost item is the market price as calculated in Market to Market. Multiplied by the quantity of the item it gives a market value.

 

For purchased goods, the contract value is negative and the market value positive. For sales it is the other way around. To get the Fair Value the 2 components are added up.

 

When booking IFRS 9 accruals is activated on an Agiblocks installation, these are transmitted as an accrual messages to the financial accounting system. For this purpose, new IFRS-9 Fair Value posting profiles have been added to Agiblocks in this release and are described in detail below.

 

Fair Value accruals are created starting from the moment a contract reaches a status marked with Update Fair Value (e.g. Approved)

Fair Value accruals are reversed:

•When goods are sold (right hand side of a delivery to a Sale is executed), as then the appropriate IFRS 15 accruals are applied instead.
•When a contractual quantity is changed to a status not marked with Update Fair Value (e.g. cancelled).

 

Furthermore, the Fair Value accruals are updated whenever the underlying cost item changes, either by the user or by re-estimating contract prices or market values. These estimates are updated at specific moments:

 

1.when pricings take place
2.when quantities are split, e.g. by partial reservations or by splitting deliveries, reservations, or inventory
3.when the position/valuation period/reporting period of an asset is changed
4.when the system wide re-estimation is run, e.g. at month-end