BC and federal regulator stick with fixed date for de-recognition under IFRS

British Columbia’s regulator is echoing the Office of the Supervisor of Financial Institutions (OSFI)’s decision to stick with the fixed date of Jan. 1, 2004 to apply de-recognition of financial assets and liabilities requirements under IFRS 1.
The standard IAS 39, Financial Instruments: Recognition and Measurement, establishes the principles for measuring an organization’s financial assets and financial liabilities.
Very basically, de-recognition involves a determination of whether an entity no longer has any rights to receive cash from an asset. A report on de-recongintion by PwC cites the following example: “if a manufacturer receives cash in settlement of a receivable, there are no longer any rights to receive cash from the asset, and the receivable is derecognised.”
Of course derecognition gets more complicated when it involves complex financial transactions such as derivatives.
Initially, the IAS 39 requirements applied to transactions that occurred on or after Jan. 1, 2004. However, in 2010, the International Accounting Standards Board (IASB) lifted the fixed Jan. 1, 2004 date and replaced it with an organization’s “date of transition to IFRS.”
But in a February 2011 letter, OSFI said first-time adopters of the de-recognition requirements in IAS 39 should not adopt the removal of fixed dates.
Federally regulated entities (FREs) “should apply the de-recognition requirements in IAS 39 prospectively for transactions occurring on or after Jan. 1, 2004,” OSFI said in its letter.
In its reasoning, OSFI said sticking with the Jan. 1, 2004 fixed date would maintain industry consistency, reduce operational burden for FREs in having to reconstruct transactions that occurred before their transition to IFRS and would maintain the notion of a level playing field with other Canadian and international financial institutions.
British Columbia’s Financial Institutions Commission echoed this decision in a bulletin.