Feedback from the GRAP 104 Financial Instruments Reference Group

The GRAP 104 Reference Group met in April 2024 to discuss the requirements on investments and revolving credit facilities.

Investments

An important place to start is to determine whether the investment an entity holds is included in the scope of GRAP 104. Many investments in controlled entities, associates and joint ventures are not in the scope of GRAP 104. An entity accounts for them using other applicable Standards of GRAP, such as GRAP 35 on Consolidated Financial Statements and GRAP 36 on Investments in Associates and Joint Ventures.

Revolving credit facilities

The Reference Group discussed revolving credit facilities from the perspective of the issuer of the facility, such as a financial institution. A revolving credit facility is a form of credit that provides the borrower with the ability to draw down and repay as they need for the duration of the term. The issuer must give careful consideration to the period over which to calculate the expected credit losses of the facility as both the loaned amount and the undrawn facility must be considered. Furthermore, due to the nature of the facility, the issuer’s ability to demand repayment and cancel the undrawn commitment cannot usually limit its exposure to credit risk to the contractual notice period.

The presentations on investments and revolving credit facilities discussed by the Reference Group are available in the Supporting Adoption of Standards library on the ASB website.