State Bank of India Issue - 7
Ind AS Monthly Newsletter April-2020
Dear Frontline warriors,
Dear Frontline Warriors,
Your role is no less significant than that of Doctors, Nurses, Policemen,
Firefighters, Garbage collators, Grocery shop people and Media. Unlike
the Doctors, you do not have PPE kits and medical knowledge of
fighting viruses. When most businesses are closed due to a deadly
pandemic, essential banking services have been running
uninterrupted. During this pandemic bank employees are still going out
every day and serve their duty to the nation. While doctors are fighting
the battle inside the hospitals to keep people healthy, bankers are
fighting outside to keep the country’s economy healthy. Thank you for
your dedication, commitment and courage for providing service to the
public at large during this pandemic. Stay safe and healthy.
A message from IFRS cell, FR & T department, SBI
We have published six issues so far and covered many important concepts of Ind AS 109
“Financial Instruments”, we shall continue sending monthly issue to your official mail
ids. Also, it is accessible anytime from Click Here (Click on the link). We believe that you Content covered in this issue:
have read all the previous issues and this is issue -7, which is in continuation of last
issue. Hence it is very important to understand previous g issues. 1. Subsequent measurement
Now, perhaps you might have questions that why one need to understand Ind AS. Also, 2. Quiz
you need to understand why Ind AS 109 “Financial Instrument” is dominant for banking
Industry. As you are aware, you all know, Ind AS is a very new and little complex yet very
interesting concept. In companies, it is already applicable. However, in near future it is
going to be applicable to the banking industry and because of which financial
statements would be prepared as per Ind AS. For that reason, it is important to
understand Ind AS. It will help you for reading, comparing and analyzing the financials.
For that reason, we have started our journey on spreading knowledge on Ind AS since
October 2019.
1. Subsequent Measurement of Financial Assets (Such as Investments, loans)
After initial measurement, i.e. price at which financial assets are recorded initially, the next step would be subsequent
measurement. Financial assets shall be measured subsequently at every reporting date based on its initial classification
into Amortised Cost (AC), Fair Value Through Other Comprehensive Income (FVTOCI) and Fair Value Through Profit or
Loss (FVTPL). It is a key and very comprehensive concept of Ind AS 109. It requires explanation to some of the new
terminologies such as Effective Interest Rate (EIR), Expected Credit Loss (ECL), Marked to Market (MTM)etc. and that
you will be coming across in detailed in upcoming newsletters.
State Bank of India For Internal Purpose only
Let’s take an overview of subsequent measurement through this chart form. Afterwards, we will take each
terminology and explain it thoroughly.
Measurement of financial assets (such as Investments, Loans)
Initial measurement Subsequent measurement
Refer Issue – 6
Click here to read
Initially classified at AC Initially classified at initially classified at
FVTOCI FVTPL
• Interest revenues on • Interest revenues on Loans/ • Interest revenues on Loans /
Loans/ Investments to be Investments to be calculated investments to be calculated
calculated using Effective using Effective Interest Rate on original coupon rate
Interest Rate (EIR) method. (EIR) method.
• Marked to Market (MTM), to
• Impairment of Loans/ • Impairment of Loans/ be recognized in profit and
Investments to be Investments to be calculated Loss account.
calculated using Expected using Expected Credit
Credit Loss(ECL) method. Loss(ECL) method.
• Current fair value is • Marked to Market (MTM)*
required to be reported for to be accounted and
disclosure purpose only. reported in the Other
Comprehensive Income
Statement@
State Bank of India For Internal Purpose only
* MTM (Marked to Market) is the difference between current fair value and carrying value.
@ In Ind AS, Profit and Loss account comprises two statements, i) Profit and Loss accounts
and ii) Other Comprehensive Income (OCI) Statement. Other Comprehensive Income
comprises items of Income and expenses that are not recognized in profit and Loss.
This is a brief pictorial format for your reference.
Statement of Profit and Loss
Note Current year Previous year
no.
*********************************** XXXXX XXXXX
*********************************** XXXXX XXXXX
*********************************** XXXXX XXXXX
Profit /Loss for the Year a) XXXXX XXXXX
Other Comprehensive Income
*********************************** XXXXX XXXXX
*********************************** XXXXX XXXXX
*********************************** XXXXX XXXXX
Total Other Comprehensive Income /Loss b) XXXXX XXXXX
Total Comprehensive Income (a+b) XXXXX XXXXX
2 ) Quiz :
SBI has purchased a 10 %, 10-year government security to earn simple interest till
maturity? What is the correct classification?
a) Fair value through other comprehensive income
b) Amortised cost
c) Fair value through profit or Loss
d) None of the above Ans: b)
Contact us
1st Floor, IFRS cell, FR&T Department For any query / suggestions /feedback
Corporate Centre, State Bank Bhavan Mail us at
Madam cama road, Nariman Point ifrs@[Link]
Mumbai – 400 021 [Link]@[Link]
Link to all previous newsletters: Click Here
Website: [Link]/department1/financial reporting and taxation/Ind AS(IFRS)
