Saturday, August 9, 2014

FINAL Version of IFRS 9, Financial Instruments

The IASB published the final version of IFRS 9 Financial Instruments in July 2014. The final version of IFRS 9 brings together the Classification and Measurement, Impairment and Hedge Accounting phases of the IASB’s project to replace IAS 39 Financial Instruments : Recognition and Measurement.

IFRS 9 is built on a logical, single classification and measurement approach for financial assets that reflects the business model in which they are managed and their cash flow characteristics. Built upon this is a forward-looking expected credit loss model that will result in more timely recognition of loan losses and is a single model that is applicable to all financial instruments subject to impairment accounting.

In addition, IFRS 9 addresses the so-called ‘own credit’ issue, whereby banks and others book gains through profit or loss as a result of the value of their own debt falling due to a decrease in credit worthiness when they have elected to measure that debt at fair value.

The Standard also includes an improved hedge accounting model to better link the economics of risk management with its accounting treatment.

As disclosed within the Press Release dated 24 July 2014, the package of improvements introduced by IFRS 9 includes a logical model for classification and measurement, a single, forward-looking ‘expected loss’ impairment model and a substantially-reformed approach to hedge accounting.

The IASB has previously published versions of IFRS 9 that introduced new classification and measurement requirements (in 2009 and 2010) and a new hedge accounting model (in 2013). The July 2014 publication represents the final version of the Standard, replaces earlier versions of IFRS 9 and completes the IASB’s project to replace IAS 39 Financial Instruments : Recognition and Measurement.

The new Standard of IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted.

Following is the link to : Project Summary of IFRS 9 Financial Instruments (July 2014)

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