Regular Way Transaction can be DEFINED as a purchase or sale of a ‘Financial Asset‘ under a contract whose terms REQUIRE delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.
For example, ‘Trades’ on the Pakistan Stock Exchange (PSX) are typically settled 2 days after the date of the trade.
Table of Contents
Regular Way Transaction – Introduction
A Regular Way purchase or sale of Financial Assets is recognized using either ‘Trade Date Accounting‘ or ‘Settlement Date Accounting‘.
An entity shall APPLY the same method consistently for all purchases and sales of financial assets that are classified in the same way in accordance with IFRS 9.
IFRS 9 – Regular Way Transaction (Accounting)
| Trade Date Accounting | Settlement Date Accounting |
|---|---|
| The ‘Trade Date’ is the date that an entity commits itself to purchase or sell an asset. | The ‘Settlement Date’ is the date on which an asset is delivered to or by an entity. |
1. Purchase of Financial Asset
| Asset to be received and the liability to pay for it are recognized on the trade date. | Asset is recognized on the date it is received by an entity. |
2. Sale of Financial Asset
| De-recognition of an asset with recognition of Receivable and (gain or loss) arising occurs on the trade date. | De-recognition of an asset with recognition of (gain or loss) on disposal on the day that it is delivered by the entity. |
3. Settlement Date Accounting (Issues)
An ‘Entity’ must account for any change in the fair value of the asset between the trade date and the settlement date in the same way as it accounts for the acquired asset.
Any CHANGE in value:
- Not recognized for Assets Measured at Amortized Cost; BUT
- Recognized in P&L or OCI as appropriate for financial assets measured at fair value (FVOCI).
Synopsis
Regular Way Transaction being conducted in the market under customary terms and conditions. It is recognized at the ‘trade date‘, with the INITIAL Measurement reflecting the fair value of the instrument and any transaction costs directly attributable to the acquisition.
Chartered Accountant – ICAP
Bachelor of Accounting (Honours) – AeU, Malaysia