Question ID
2019_4464
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Supervisory reporting - FINREP (incl. FB&NPE)
Article
99
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)
Article/Paragraph
DPM 2.8
Type of submitter
Credit institution
Subject matter
Validation rule v1088_m
Question

Validation rule v1088_m verifies that the amount entered in F01.01 row 280, column 010 (Property, Plant and Equipment in the Balance Sheet Statement) should be equal or larger than the amount entered in F13.02 row 020, column 010 (Property, Plant and Equipment obtained by taking possession during the period). This validation rule implies that collateral obtained in the form (nature) of Property, Plant and Equipment is classified in the Balance Sheet Statement as Property, Plant and Equipment. We believe in most cases the collateral obtained by taking possession will be classified as either held for sale (based on IFRS 5.6 and meeting the requirements from IFRS 5.7) or as “other assets” (based on meeting the conditions of IFRS 5.6, but not IFRS 5.7 (plan for immediate sale in present condition and sale being highly probable)) and thereby will be reported in either F01.01 row 370, column 010 or F01.01 row 360, column 010. We therefore question whether the current validation rule is appropriate.

Background on the question

The validation rule has a ‘blocking’ status. In most cases collateral obtained by taking possession will be classified either as held for sale (based on meeting the definition of IFRS 5.6) or other assets (based on meeting the definition of IFRS 5.6, but not IFRS 5.7). We therefore foresee this validation rule potentially creating incorrect blocking errors. v1088_m: {F 13.02, r020, c010} <= {F 01.01, r280, c010} The above statements are based on the references given in Annex 3 (FINREP). • Annex 3 (FINREP) F13.02 row 020 references to IFRS 7.38(a). This paragraph describes that an entity shall disclose obtained ‘financial or non-financial assets during the period, by taking possession of collateral’, ‘the nature and carrying amount of the assets’. • Annex 3 (FINREP) F01.01 row 280 references to IAS 16.6 which describes that ‘property, plant and equipment’ are tangible items that are held for use in the production or supply of goods of services, for rental to others, or for administrative purpose; and are expected to be used during more than one period. • Annex 3 (FINREP) F01.01 row 360 references to Annex V, Part 2.5, which describes that assets that are not financial assets and that due to their nature could not classified in specific balance sheet items, shall be reported in ‘Other assets’. • Annex 3 (FINREP) F01.01 row 370 references to IAS 1.54(j); IFRS 5.38 and Annex V, Part 2.7. o IAS 1.54(j) indicates that ‘the total of assets classified as held for sale and assets included in disposal groups classified as held for sale’ is a separate line item that should be included in the statement of financial position. For assets classified as held for sale it references to IFRS 5 paragraphs 6-14. IFRS 5.6 then prescribes that an entity shall classify a non-current asset (or disposal group) as held for sale if its carrying value amount will be recovered principally through a sale transaction rather than through continuing use. This applies for the collateral that we obtain through taking possession. IFRS 5.7 is the paragraph that describes that conditions apply for assets to be marked as held for sale, such as that is must be an immediate sale of the assets in their current condition and that the sale must be highly probable. o IFRS 5.38 is an article for the presentation of a non-current asset or disposal group classified as held for sale and just refers back to IFRS 5 paragraphs 6-14. o Annex V, Part 2.7 describes that ‘non-current assets and disposal groups classified as held for sale’ shall have the same meaning as under IFRS 5.

Submission date
Final publishing date
Final answer

Template F 13.02 of Annex III to Regulation (EU) No 680/2014 (ITS on Supervisory Reporting) includes information on collateral that has been obtained by taking possession during the period (between the beginning and the end of the reference period) and that is recognised in the balance sheet at the reference date. In this template collateral is classified on the basis of the nature of the assets (as per IFRS 7.38 (a)), taking into account possible applicable accounting standards (for example, IAS 2, IAS 16, IAS 40, IFRS  5 and IFRS 9).

The F 13.02 row 020, column 010 (Property, Plant and Equipment obtained by taking possession during the period) contains flow information on ‘Property, Plant and Equipment’ which are regulated by IAS 16.

Differently, the F 01.01 row 280, column 010 (Property, Plant and Equipment in the Balance Sheet Statement) contains stock information on the entire ‘Property, Plant and Equipment’ as referred in IAS 16. 

As the carrying amounts in F 13.02 row 020 specify some movements of the corresponding amounts in F 01.01 row 280, the validation rule is correct.

Collateral obtained by taking possession and classified in F01.01 as “non- current assets and disposal groups classified as held for sale” (row 370) refers to assets acquired exclusively with a view to subsequent disposal and their sale is highly probable as per IFRS 5.6. Those assets should be reported under row 010 “Non-current assets held-for-sale” of template F13.2.

Status
Final Q&A
Answer prepared by
Answer prepared by the EBA.

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