Derecognition of a financial asset — Accounting glossary

A financial asset is derecognised when contractual cash-flow rights expire or when it is transferred and the relevant IFRS 9 derecognition tests are met. Assess whether substantially all risks and rewards are transferred or retained; if neither, assess whether control is retained. Specified continuing-involvement accounting can apply. A legal sale or a cash advance alone does not settle the accounting outcome.

Worked example

An entity sells a $100,000 receivable to a factor for $95,000 and transfers substantially all associated risks and rewards. Assuming the IFRS 9 transfer criteria are satisfied, it derecognises the receivable and recognises the relevant $5,000 difference.

Common mistake

Derecognising all factored receivables automatically or claiming any continuing involvement always prevents derecognition.

Where it appears in your exams

Qualification	Exam	Relationship	Period
ACCA	FR	Direct	September 2026–June 2027
ACCA	SBR	Direct	September 2026–June 2027