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Reporting Form ARF 320.4
Bill Acceptances and Endorsements
Instruction Guide
General directions and notes
Reporting entity
The Bill Acceptances and Endorsements form is to be completed by all locally
incorporated banks, Foreign ADIs and Special Service Providers on a Domestic
Books basis.
The Domestic books of the locally incorporated banks, Foreign ADIs and Special
Service Providers relates to the Australian books of the Australian ADI and has the
following scope:
•
Is an unconsolidated report of the Australian
operations/transactions that are booked inside Australia.
•
Exclude offshore branches of the Australian licensed ADI from this reporting
unit.
•
Exclude offshore banking units based overseas from this reporting unit.
•
Do not consolidate Australian and offshore controlled entities or associated
entities that are not ADIs.
•
Include Australian based offshore banking units of the licensed ADI.
•
Include transactions with non-residents recorded on Australian books.
licensed
ADI's
Securitisation Deconsolidation Principle
Except where stated otherwise on this form, reporting entities must
treat any securitisation program SPVs in which the ADI (or a member of its
consolidated group) participates in accordance with APRA’s clean sale and separation
requirements as non-consolidated independent third parties. As a result, for reporting
purposes all assets, liabilities, revenues and expenses of these SPVs must be excluded
from the ADI’s reported amounts. Where relevant, report on this form any
exposure to or other transaction between the ADI and any such SPV as if such
transaction was conducted with an independent third party, regardless of whether the
SPV or its assets is consolidated for accounting purposes.
APRA's clean sale and separation requirements are set out in APS 120 Funds
Management and Securitisation and related Guidance Notes AGN 120.3 Purchase
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and Supply of Assets (including Securities Issued by SPVs) and AGN 120.1 Disclosure
and Separation. Whenever the clean sale and separation requirements are not met, all
the assets, liabilities, revenues and expenses of the SPV are to be consolidated with
the ADI’s reported amounts.
Reporting period
The form is to be completed as at the last day of the reporting month. Locally
incorporated banks, Foreign ADIs and Special Service Providers should submit the
completed form to APRA within 10 business days after the end of the relevant
reporting month.
Unit of measurement
Banks are asked to complete the form in millions of Australian dollars rounded to one
decimal place. Special Service Providers are asked to complete the form in whole
Australian dollars (no decimal place).
Amounts denominated in foreign currency are to be converted to AUD in accordance
with AASB 121 The Effects of Changes in Foreign Exchange Rates.
The general requirements of AASB 121 The Effects of Changes in Foreign Exchange
Rates for translation are:
1. Foreign currency monetary items outstanding at the reporting date must be
translated at the spot rate at the reporting date1.
2. Foreign currency non-monetary items that are measured at historical cost in a
foreign currency must be translated using the exchange rate at the date of the
transaction2.
3. Foreign currency non-monetary items that are measured at fair value will be
translated at the exchange rate at the date when fair value was determined.
Transactions arising under foreign currency derivative contracts at the reporting date
must be prepared in accordance with AASB 139 Financial Instruments: Recognition
and Measurement. However, those foreign currency derivatives that are not within
the scope of AASB 139 Financial Instruments: Recognition and Measurement (e.g.
some foreign currency derivatives that are embedded in other contracts) remain within
the scope of AASB 121 The Effects of Changes in Foreign Exchange Rates.
For APRA purposes equity items must be translated using the foreign currency
exchange rate at the date of investment or acquisition. Post acquisition changes in
equity are required to be translated on the date of the movement.
1
Monetary items are defined to mean units of currency held and assets and liabilities to be received or
paid in a fixed or determinable number of units of currency. Spot rate means the exchange rate for
immediate delivery.
2
Examples of non-monetary items include amounts prepaid for goods and services (e.g. prepaid rent);
goodwill; intangible assets; physical assets; and provisions that are to be settled by the delivery of a
non-monetary asset.
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As foreign currency derivatives are measured at fair value, the currency derivative
contracts are translated at the spot rate at the reporting date.
Exchange differences should be recognised in profit and loss in the period which they
arise. For foreign currency derivatives, the exchange differences would be recognised
immediately in profit and loss if the hedging instrument is a fair value hedge. For
derivatives used in a cash flow hedge, the exchange differences should be recognised
directly in equity.
The ineffective portion of the exchange differences in all hedges would be recognised
in profit and loss.
4. Translation of financial reports of foreign operations.
A foreign operation is defined in AASB 121 The Effects of Changes in Foreign
Exchange Rates as meaning an entity that is a subsidiary, associate, joint
venture or branch of a reporting entity, the activities of which are based or
conducted in a country or currency other than those of the reporting entity.
¾ Exchange differences relating to foreign currency monetary items that
form part of the net investment of an entity in a foreign operation, must be
recognised as a separate component of equity.
¾ Translation of financial reports should otherwise follow the requirements
in AASB 121 The Effects of Changes in Foreign Exchange Rates.
Timing
Report assets and liabilities as at the date change of ownership took place.
Netting
Unless otherwise specifically stated, institutions are to comply with the prerequisite
for netting outlined in Australian accounting standards AASB 139 Financial
Instruments: Recognition and Measurement, AASB 132 Financial Instruments:
Disclosure and Presentation and AASB 7 Financial Instruments: Disclosures and any
relevant prudential standards.
Term to maturity
References to term to maturity in this form are references to original term to maturity
Valuation and currency conversion
Closing balances should be reported at market price effective at the reference date.
Where denominated in foreign currency, market values in foreign currency should be
converted to AUD at the spot rate effective as at the reference date.
Basis of preparation
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Unless otherwise specifically stated, institutions are to comply with Australian
accounting standards regarding the measurement of asset, liability and equity items.
Definitions
A bill of exchange is an unconditional order drawn (issued) by one party, sent to
another party (usually a bank) for acceptance and made out to, or to the order of, a
third party, or to bearer. It is a negotiable instrument with an original term to maturity
of 180 days or less.
Accepted bills of exchange have been signed by a bank as the drawee which "accepts"
liability to pay out the funds on the due date.
Endorsement of a bill of exchange creates a contingent liability by the endorser to pay
out the funds conditional on the bearer/holder demanding payment.
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Specific instructions
Bill acceptances and endorsements by drawer
Report the amount of bills of exchange that have been accepted or accepted and
endorsed by this ADI at market value by counterparty of drawer. Only endorsed bills
where the bank is the first endorser of a non-ADI or Registered Financial Corporation
accepted bill should be included.
Include:
•
holdings of own acceptances or endorsed bills.
Exclude:
•
bills of exchange neither accepted nor endorsed;
•
endorsed bills drawn by the general government; and
•
bills of exchange held by this ADI, but accepted by another party.
Reconciliation with ARF 320.0 Statement of Financial Position (Domestic
Books)
Total acceptances of customers
The sum of:
•
Total non-financial counterparties - Accepted (ARF 320.4 Bill Acceptances and
Endorsements);
•
Total financial corporations - Accepted (ARF 320.4 Bill Acceptances and
Endorsements); and
•
Less holdings of own acceptances.
Equals
Acceptances of Customers (ARF 320.0 Statement of Financial Position (Domestic
Books)).
Example - Treatment of own holdings of own acceptances
Suppose that a company (called the drawer or borrower) draws a bill of exchange
payable in 180 days. The ADI then accepts these bills, and therefore accepts liability
to pay to the person presenting the bill (called the holder) the face value of the bill on
maturity. The ADI, as acceptor of the bill, will on maturity of the bill require the
drawer (borrower) to pay the face value of the bill to the ADI.
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This bill acceptance is reported on ARF 320.4 Bill Acceptances and Endorsements by
the ADI accepting the bill at market value, which at inception is equal to the face
value of the bill minus the discount, whether or not the bill is held within the ADI’s
portfolio.
If this bill is accepted and not held within the ADI's portfolio, then this acceptance is
reported on ARF 320.0 Statement of Financial Position (Domestic Books) as a liability
item "Acceptances", which represents the liability arising from the acceptance of the
bill of exchange. A corresponding contra asset is reported as "Acceptances of
customers", which represents the drawers' commitment to repay the face value of the
bill to the ADI at maturity.
Holdings of own bill acceptances
If this bill is accepted and held within the ADI's own portfolio it should be included as
an asset on ARF 320.0 Statement of Financial Position (Domestic Books) and
classified to either trading or investment securities. This type of bill acceptance is
excluded from the liability item "Acceptances" on the ARF 320.0 Statement of
Financial Position (Domestic Books), since the ADI is also the holder of the bills. It
is also excluded from the contra asset item "Acceptances of customers", since this
claim on the drawer is classified as a security holding.
Holdings of own bill acceptances should also be reported to Bills of Exchange (Bank
accepted) on ARF 320.1 Debt Securities Held. Bills purchased by the bank, which are
accepted by other ADIs, will also be classified to trading or investment securities, and
reported to Bills of Exchange (Bank accepted) on ARF 320.1 Debt Securities Held.
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