Retained control and continuing involvement

Learning objectives

• Assess whether the transferee has the practical ability to sell the asset in its entirety to an unrelated third party without imposing additional restrictions, and conclude whether control has been retained.L3, L4

Normative references

• IFRS 9 §3.2.6When the rights are transferred, the entity first evaluates the extent to which it retains the risks and rewards of ownership: (a) substantially all transferred: derecognition and separate recognition of any rights and obligations created or retained; (b) substantially all retained: the asset continues to be recognised; (c) neither transferred nor retained: control is considered — control not retained: derecognition; control retained: the asset continues to be recognised to the extent of the continuing involvement. The Standard sets no numerical threshold for 'substantially all'.
• IFRS 9 §3.2.9Whether the entity has retained control of the transferred asset depends on the transferee's ability to sell it: the entity has not retained control if the transferee has the practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally, without needing to impose additional restrictions on the transfer; in all other cases, control is retained.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

1 question

• Zeta SA has transferred a portfolio of receivables without transferring or keeping substantially all the risks and rewards. The buyer can resell the whole portfolio to an unrelated third party, but the contract requires it to obtain Zeta's consent for any resale. Which treatment applies to Zeta?L4