BCZ3.27 The IASB decided that if the entity determines that it has neither retained nor transferred substantially all of the risks and rewards of an asset and that it has retained control, the entity should continue to recognise the asset to the extent of its continuing involvement. This is to reflect the transferor’s continuing exposure to the risks and rewards of the asset and that this exposure is not related to the entire asset, but is limited in amount. The IASB noted that precluding derecognition to the extent of the continuing involvement is useful to users of financial statements in such cases, because it reflects the entity’s retained exposure to the risks and rewards of the financial asset better than full derecognition.

BCZ3.28 When the entity transfers some significant risks and rewards and retains others and derecognition is precluded because the entity retains control of the transferred asset, the entity no longer retains all the upside and downside exposure to gains and losses resulting from the transferred asset. Consequently, the revised IAS 39 required (and IFRS 9 now requires) the asset and the associated liability to be measured in a way that ensures that any changes in value of the transferred asset that are not attributed to the entity are not recognised by the entity.