All equity investments in scope of IFRS 9 are to be measured at fair value in the statement of financial position, with value changes recognised in profit or loss, except for those equity investments for which the entity has elected to present value changes in 'other comprehensive income'. In October 2017, the IASB clarified that the compensation payments can also have a negative sign. Whilst for equity investments, the FVTOCI classification is an election. [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. The session discusses identification of each stage and accounting for impairment loss Disclosures under IFRS 9 | 1 where the fair value option has been exercised in any circumstance for a financial assets or financial liability. �'Dr��E�@��A �X bo�� ����10�pl/#E��C_ �$K For a limited period, previous versions of IFRS 9 may be adopted early if not already done so provided the relevant date of initial application is before 1 February 2015. IFRS 9 requires that the same impairment model apply to all of the following: With the exception of purchased or originated credit impaired financial assets (see below), expected credit losses are required to be measured through a loss allowance at an amount equal to: A loss allowance for full lifetime expected credit losses is required for a financial instrument if the credit risk of that financial instrument has increased significantly since initial recognition, as well as to contract assets or trade receivables that do not constitute a financing transaction in accordance with IFRS 15. Amounts presented in other comprehensive income shall not be subsequently transferred to profit or loss, the entity may only transfer the cumulative gain or loss within equity. IFRS 9 Financial Instruments in July 2014. In addition, the foreign currency risk of a highly probable forecast intragroup transaction may qualify as a hedged item in consolidated financial statements provided that the transaction is denominated in a currency other than the functional currency of the entity entering into that transaction and the foreign currency risk will affect consolidated profit or loss. The entity may designate that financial instrument at, or subsequent to, initial recognition, or while it is unrecognised and shall document the designation concurrently. Also, whilst in principle the assessment of whether a loss allowance should be based on lifetime expected credit losses is to be made on an individual basis, some factors or indicators might not be available at an instrument level. ����!������,��{Y���E������q}rj�v�'����8n�)�q�N �El���@�q+���!|�[p�p00�� �Y' )N�#a`./Ä��@>/�K匋 TA* there is an economic relationship between the hedged item and the hedging instrument; the effect of credit risk does not dominate the value changes that result from that economic relationship; and, the hedge ratio of the hedging relationship is the same as that actually used in the economic hedge [IFRS 9 paragraph 6.4.1(c)], the name of the credit exposure matches the reference entity of the credit derivative (‘name matching’); and. An asset is transferred if either the entity has transferred the contractual rights to receive the cash flows, or the entity has retained the contractual rights to receive the cash flows from the asset, but has assumed a contractual obligation to pass those cash flows on under an arrangement that meets the following three conditions: [IFRS 9, paragraphs 3.2.4-3.2.5], Once an entity has determined that the asset has been transferred, it then determines whether or not it has transferred substantially all of the risks and rewards of ownership of the asset. According to the new model, credit exposures will be categorized into one of three stages, depending on the increase in credit risk since initial recognition (Figure 1). leasing contracts, insurance contracts, contracts for the purchase or sale of a non-financial items). Financial Instruments: Disclosures. An entity does not restate any previously recognised gains, losses, or interest. IFRS 9 will be effective for annual periods beginning on or after January 1, 2018, subject to endorsement in certain territories. 0 IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement, and is effective for annual periods beginning on or after January 1, 2018. IFRS 9 (the new accounting standard) is fast approaching with many organisations already in full swing in terms of development and with their chasing pack firmly in the planning stages for design and build.  But just how ready are you for the impending changes? [IFRS 9, paragraph 4.1.4], Even if an instrument meets the two requirements to be measured at amortised cost or FVTOCI, IFRS 9 contains an option to designate, at initial recognition, a financial asset as measured at FVTPL if doing so eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an 'accounting mismatch') that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. in the case of a cash flow hedge of a group of items whose variabilities in cash flows are not expected to be approximately proportional to the overall variability in cash flows of the group: it is a hedge of foreign currency risk; and, the designation of that net position specifies the reporting period in which the forecast transactions are expected to affect profit or loss, as well as their nature and volume [IFRS 9 paragraph 6.6.1], the cumulative gain or loss on the hedging instrument from inception of the hedge; and. On 28 October 2010, the IASB reissued IFRS 9, incorporating new requirements on accounting for financial liabilities, and carrying over from IAS 39 the requirements for derecognition of financial assets and financial liabilities. 80 0 obj <>/Filter/FlateDecode/ID[<9E171BD66CA66F4A8F10428C3AFCCC1A><1DCB95CE12B2B34F87C6B5A095F08D8F>]/Index[59 35]/Info 58 0 R/Length 107/Prev 128116/Root 60 0 R/Size 94/Type/XRef/W[1 3 1]>>stream at the inception of the hedging relationship there is formal designation and documentation of the hedging relationship and the entity’s risk management objective and strategy for undertaking the hedge. the purchase or origination of a financial asset at a deep discount that reflects incurred credit losses. The requirements also contain a rebuttable presumption that the credit risk has increased significantly when contractual payments are more than 30 days past due. A debt instrument that meets the following two conditions must be measured at amortised cost (net of any write down for impairment) unless the asset is designated at FVTPL under the fair value option (see below): Assessing the cash flow characteristics also includes an analysis of changes in the timing or in the amount of payments. Consequential amendments of IFRS 9 to IAS 1 require that impairment losses, including reversals of impairment losses and impairment gains (in the case of purchased or originated credit-impaired financial assets), are presented in a separate line item in the statement of profit or loss and other comprehensive income. 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). 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 introduced new requirements for classifying and measuring financial assets that had to be applied starting 1 January 2013, with early adoption permitted. specifically identified cash flows from an asset (or a group of similar financial assets) or, a fully proportionate (pro rata) share of the cash flows from an asset (or a group of similar financial assets). IFRS 9 is imprecise about the treatment of forbearance. IFRS 9 amends some of the requirements of IFRS 7 Financial Instruments: Disclosures including adding disclosures about investments in equity instruments designated as at FVTOCI, disclosures on risk management activities and hedge accounting and disclosures on credit risk management and impairment. Under IAS 39, provisions for credit losses are measured in accordance with an incurred loss model. These various derecognition steps are summarised in the decision tree in paragraph B3.2.1. That determination is made at initial recognition and is not reassessed. 60%) but not a time portion (eg the first 6 years of cash flows of a 10 year instrument) of a hedging instrument to be designated as the hedging instrument. [IFRS 9, paragraph 4.1.1] If certain conditions are met, the classification of an asset may subsequently need to be reclassified. [IFRS 9 paragraph 6.5.10], Cash flow hedge: a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with all, or a component of, a recognised asset or liability (such as all or some future interest payments on variable-rate debt) or a highly probable forecast transaction, and could affect profit or loss. [IFRS 9 paragraphs B5.5.47], Whilst interest revenue is always required to be presented as a separate line item, it is calculated differently according to the status of the asset with regard to credit impairment. The version of IFRS 9 issued in 2014 supersedes all previous versions and is mandatorily effective for periods beginning on or after 1 January 2018 with early adoption permitted (subject to local endorsement requirements). Hedge of a net investment in a foreign operation (as defined in IAS 21), including a hedge of a monetary item that is accounted for as part of the net investment, is accounted for similarly to cash flow hedges: The cumulative gain or loss on the hedging instrument relating to the effective portion of the hedge is reclassified to profit or loss on the disposal or partial disposal of the foreign operation. Two measurement categories continue to exist: FVTPL and amortised cost. [IFRS 9 paragraph 6.2.5], Combinations of purchased and written options do not qualify if they amount to a net written option at the date of designation. A separate section. Further details on the changes to classification and measurement of financial assets are included in In depth US2014-05, IFRS 9 - Classification and measurement. [IFRS 9 paragraph B5.5.35], To reflect time value, expected losses should be discounted to the reporting date using the effective interest rate of the asset (or an approximation thereof) that was determined at initial recognition. [IFRS 9 paragraph 6.5.11], When an entity discontinues hedge accounting for a cash flow hedge, if the hedged future cash flows are still expected to occur, the amount that has been accumulated in the cash flow hedge reserve remains there until the future cash flows occur; if the hedged future cash flows are no longer expected to occur, that amount is immediately reclassified to profit or loss [IFRS 9 paragraph 6.5.12], A hedge of the foreign currency risk of a firm commitment may be accounted for as a fair value hedge or a cash flow hedge. IFRS fokussiert IFRS 9 – Das neue Wert- minderungsmodell im Überblick IFRS Centre of Excellence Juli 2014 Das Wichtigste in Kürze Mit dem jüngst veröffentlichten IFRS 9 (2014) Finan-zinstrumente werden neben den Vorschriften für Wertminderungen auch die Klassifizierung und Bewer-tung von Finanzinstrumenten endgültig geregelt. Consequently, the exception in IAS 39 for a fair value hedge of an interest rate exposure of a portfolio of financial assets or financial liabilities continues to apply. The purchase or sale of a Portfolio Revaluation approach to Macro hedging of. Impairment Workbench requirements in IFRS 9 | 1 this results in delay of loss recognition are stages... An election with a more responsive and personalised service assist an entity required. 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