Please read, International Financial Reporting Standards, Financial instruments — Macro hedge accounting, IBOR reform and the effects on financial reporting — Phase 2, Deloitte e-learning on IFRS 9 - classification and measurement, Deloitte e-learning on IFRS 9 - derecognition, Deloitte e-learning on IFRS 9 - hedge accounting, Deloitte e-learning on IFRS 9 - impairment, IBOR reform and the effects on financial reporting — Phase 1, EFRAG publishes draft endorsement advice on IBOR amendments, IASB finalises phase 2 of its IBOR reform project, EFRAG outreach event in the context of the endorsement process of IBOR Phase 2, EFRAG publishes discussion paper on crypto-assets (liabilities), IASB publishes proposed IFRS Taxonomy update, EFRAG endorsement status report 23 October 2020, EFRAG endorsement status report 14 September 2020, IFRS in Focus — IASB issues 'Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)', EFRAG endorsement status report 28 August 2020, Effective date of IBOR reform Phase 2 amendments, Effective date of 2018-2020 annual improvements cycle, IAS 39 — Financial Instruments: Recognition and Measurement, IFRIC 10 — Interim Financial Reporting and Impairment, Different effective dates of IFRS 9 and the new insurance contracts standard, Financial instruments — Effective date of IFRS 9, Financial instruments — Limited reconsideration of IFRS 9, Transition Resource Group for Impairment of Financial Instruments, Original effective date 1 January 2013, later removed, Amended the effective date of IFRS 9 to annual periods beginning on or after 1 January 2015 (removed in 2013), and modified the relief from restating comparative periods and the associated disclosures in IFRS 7, Removed the mandatory effective date of IFRS 9 (2009) and IFRS 9 (2010). Disclosures under IFRS 9 | 1 [IFRS 9 Appendix A] Whilst an entity does not need to consider every possible scenario, it must consider the risk or probability that a credit loss occurs by considering the possibility that a credit loss occurs and the possibility that no credit loss occurs, even if the probability of a credit loss occurring is low. Derecognition is the removal of a previously recognised financial asset from an entity’s statement of financial position. If you wish to opt out, please close your SlideShare account. In other cases, it will be necessary to compute and compare the entity’s exposure to the variability in the present value of the future net cash flows before and after the transfer. [IFRS 9 paragraphs 6.5.2(a) and 6.5.3], For a fair value hedge, the gain or loss on the hedging instrument is recognised in profit or loss (or OCI, if hedging an equity instrument at FVTOCI and the hedging gain or loss on the hedged item adjusts the carrying amount of the hedged item and is recognised in profit or loss. An entity may also exclude the foreign currency basis spread from a designated hedging instrument. An entity choosing to apply the deferral approach does so for annual periods beginning on or after 1 January 2018. With careful planning, the changes that IFRS 9 introduces might provide a great opportunity for balance sheet optimization, or enhanced efficiency of the reporting process and cost savings. If reclassification is appropriate, it must be done prospectively from the reclassification date which is defined as the first day of the first reporting period following the change in business model. The basic premise for the derecognition model in IFRS 9 (carried over from IAS 39) is to determine whether the asset under consideration for derecognition is: [IFRS 9, paragraph 3.2.2]. If entity retains substantially all risks and rewards, it continues to recognise the asset. Example 2 – Applying the ‘own use’ scope exemption. Overview. Post them on our Forum. The IASB completed its project to replace IAS 39 in phases, adding to the standard as it completed each phase. The classification of a financial asset is made at the time it is initially recognised, namely when the entity becomes a party to the contractual provisions of the instrument. Despite the fair value requirement for all equity investments, IFRS 9 contains guidance on when cost may be the best estimate of fair value and also when it might not be representative of fair value. There are three types of hedging relationships: Fair value hedge: a hedge of the exposure to changes in fair value of a recognised asset or liability or an unrecognised firm commitment, or a component of any such item, that is attributable to a particular risk and could affect profit or loss (or OCI in the case of an equity instrument designated as at FVTOCI). A hedging relationship qualifies for hedge accounting only if all of the following criteria are met: Only contracts with a party external to the reporting entity may be designated as hedging instruments. Subsequent measurement of financial liabilities, IFRS 9 doesn't change the basic accounting model for financial liabilities under IAS 39. Finally, examples of when an entity has neither retained nor transferred substantially all the risks and rewards are given in paragraphs IFRS 9.B3.2.16(h)-(i) and IFRS9.B3.2.17. Financial assets measured at amortised cost; Financial assets mandatorily measured at FVTOCI; Loan commitments when there is a present obligation to extend credit (except where these are measured at FVTPL); Financial guarantee contracts to which IFRS 9 is applied (except those measured at FVTPL); Lease receivables within the scope of IAS 17, Contract assets within the scope of IFRS 15, the 12-month expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date); or. The question ‘have the rights to the cash flows from the asset expired?’ is the first step in the derecognition decision tree and is covered in paragraph IFRS 9.3.2.3(a). IFRS 9 Financial Instruments is the IASB’s replacement of IAS 39 Financial Instruments: Recognition and Measurement. If the entity transfers substantially all risks and rewards, it derecognises the asset. The associated liability is measured at (IFRS 9.B3.2.13(c)): Paragraph IFRS 9.B3.2.17 illustrates accounting for continuing involvement in a part of a financial asset. Where assets are measured at fair value, gains and losses are either recognised entirely in profit or loss (fair value through profit or loss, FVTPL), or recognised in other comprehensive income (fair value through other comprehensive income, FVTOCI). the hedging relationship consists only of eligible hedging instruments and eligible hedged items. For financial assets, reclassification is required between FVTPL, FVTOCI and amortised cost, if and only if the entity's business model objective for its financial assets changes so its previous model assessment would no longer apply. [IFRS 9 paragraphs 5.5.3 and 5.5.10], The Standard considers credit risk low if there is a low risk of default, the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations. The embedded derivative guidance that existed in IAS 39 is included in IFRS 9 to help preparers identify when an embedded derivative is closely related to a financial liability host contract or a host contract not within the scope of the Standard (e.g. If the entity has retained control, it continues to recognise the financial asset to the extent of its continuing involvement in the financial asset (IFRS 9.3.2.6(c)).

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