11.3. Derecognition of financial instruments from the statement of financial position
Financial assets are derecognized from the statement of financial position when contractual rights to the cash flows from the financial asset expire or when the Group does not have justified prospects for recovering the given financial asset in full or in part, or when the financial asset is transferred by the Group to another entity. The financial asset is transferred when the Group:
- transfers contractual rights to cash flows from the financial asset, or
- retains contractual rights to cash flows from the financial asset, but assumes a contractual obligation to transfer these cash flows to a third party.
When transferring a financial asset, the Group makes an assessment of the extent to which it retains the risks and rewards of the ownership of the financial asset.
- If substantially all risks and benefits associated with holding a given financial asset are transferred, the financial asset is eliminated from the statement of financial position;
- If the Group retains substantially all risks and rewards of ownership of a financial asset, the Group continues to present the financial asset in the statement of financial position;
- If the Group neither transfers nor retains substantially all risks and rewards of ownership of a financial asset, the Group determines whether or not it has retained control over the financial If the Group has retained control, it continues to recognize the financial asset in the statement of financial position to the extent of its continuing involvement in the financial asset; if control has not been retained, the financial asset is derecognized from the statement of financial position.
The Group derecognizes a financial liability (or a part thereof) from its statement of financial position when the contractual liability has been settled, cancelled, or has expired.
The Group excludes financial assets from the statement of financial position when, among other things, they are subject to invalidation by a final court judgement, cancellation by prescription or they are uncollectible. When the said assets are derecognized, they are charged to the respective credit loss allowances or losses in respect of legal risk (in case of invalidation of CHF loans).
In the event that no allowances have been recognised, or if the amount of the allowance is less than the amount of the financial asset, the amount of the credit loss allowance is increased by the difference between the value of the asset and the amount of the allowance that has been recognized to date.