Background
1. The current Bulletin C-3 (in force from 1974) basically focuses on commercial accounts receivable, without addressing loans, since credit and insurance institutions are excluded.
2. Bulletin C-2 is basically focused on the classification of primary financial instruments, establishing three categories to classify them: (1) trading, (2) available for sale and (3) held to maturity based on the intention of the possession of them. Financial instruments receivable * were included in this last category.
3. Adaptation to NIF C-1 “Cash and cash equivalents”. Investments available at sight (up to 2009 “temporary investments”) are included as cash and cash equivalents, if their maturity is up to 90 days from the date of acquisition.
4. The category of held to maturity includes the financial instruments that an entity has in order to obtain a return on the interest they generate (characteristics equivalent to those of a loan).
Reasons for issuing NIF C-3
1. In 2008, the international financial markets suffered an acute crisis that questioned the validity of financial reporting standards, so the main issuers of financial reporting standards at the international level committed to issuing more solid, simple and consistent standards on financial reporting. the subject of financial instruments.
2. The CINIF found it necessary to restructure the standards relating to financial instruments to converge with those of the IASB, but issuing a single standard on such a complex subject would make it very difficult to understand. Therefore, it decided to first issue regulations that exclusively deal with the recognition of investments in financial instruments.
3. NIF C-3 “Accounts and financial instruments receivable”, and NIF C-2 “Investment in negotiable financial instruments”, are the first two standards on financial instruments. The CINIF plans to separately issue standards on:
- Amortized cost and impairment of financial instruments.
- Derivative financial instruments and hedges.
- Transfer and cancellation of financial instruments.
- Financial liabilities.
- Compensation of financial assets and liabilities and,
- Financial instruments with liability and capital characteristics.
Main changes
- The main change in this standard with respect to previous pronouncements is the classification of financial instruments in assets.
- Reclassification of financial instruments between the classes of financial instruments receivable and negotiable instruments is not allowed, unless the entity's business strategy changes, which is very infrequent. For example, it would not be common for a mortgage bank to stop making home loans to pursue investment banking and vice versa.
Classification of financial instruments:
- Those that are held to obtain a contractual yield will be recognized at their amortized cost.
- Those that are held to obtain a gain due to their change in value and purchase and sale will be recognized at fair value.
Other changes
- Impairment losses in the value of trade receivables must be presented as a line within the sales income and that of the IFC of financial institutions in a line of the financial margin, as indicated in the standards relating to the recognition of income and impairment of financial instruments. Any reversal of an impairment loss must be recognized in the same account in which the impairment loss was recognized.
- Reveal IFC's concentration risk. It occurs when most of the operations of an entity are carried out with a counterparty that may cease to operate, leaving significant financial assets in charge of said entity, which can cause a significant loss.
- Reveal currency risk. It arises from IFCs denominated in a foreign currency, different from the functional currency in which they are valued. The sensitivity analysis should be carried out in each currency (currency) in which the entity has a significant exposure.
Convergence with IFRS (IFRS)
The new NIF C-3 converges with:
- IFRS 9 "Financial Instruments"
- IAS 32 "Financial Instruments: Presentation"
- IAS 39 “Financial Instruments: Recognition and Valuation”, and
- IFRS 7 “Financial Instruments: Disclosures”, except that the reclassification date of financial instruments must be when the change in business strategy has been made and not until the beginning of the following accounting period, as established by IFRS 9.
Validity
The provisions of this NIF shall enter into force for fiscal years beginning on January 1, 2013 and render Bulletin C-3 "Accounts receivable" ineffective. Early application of this NIF is not allowed.
