GRAP 104 Financial Instruments Reference Group feedback

The Reference Group members met on 19 July 2023 to discuss the requirements in GRAP 104 (revised 2019) on loan commitments. A loan commitment is an agreement by an entity to lend a specified sum of money (subject to certain terms and conditions) to an individual or another entity.

Most loan commitments are excluded from the scope of GRAP 104. The type of loan commitment within the scope of GRAP 104 and most prevalent in the public sector are loan commitments to provide concessionary loans. Public entities that engage in financial services as well as development agencies are examples of entities that may be exposed to loan commitments on concessionary loans.

A loan commitment is seen as an extension of the loan to be provided. Loan commitments for concessionary loans are measured at the higher of:

• their fair value on initial recognition less, where applicable, the amortised revenue from the commitment fee; and
• their loss allowance plus social benefit.

The loss allowance on a loan commitment represents the present value of the expected credit losses on the loan and the drawdowns on the loan commitment.

For more information on loan commitments, access the Reference Group material on the ASB website.