Definition of AFS Reserve
'Available for sale reserve' - IFRS requires financial assets and liabilities to be recorded at fair value. Fair value is the amount of consideration agreed upon in an arm's length transaction between knowledgeable, willing parties who are under no compulsion to act - ie it is very similar to market value. Banks have to include changes to fair value in their income statement to the extent that these changes represent likely impairments - ie the cash flows on the assets are likely to be less than originally anticipated. So for example, trading asset fair value changes will appear in the income statement. However, the change in fair value of available for sale financial assets (ie assets that the bank intends to hold to maturity) other than trading assets is not shown in the income statement - it goes straight to the available for sale reserve. So you will only see this change in value in the balance sheet and statement of changes in equity.
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