Narrow-scope amendments to IFRS 9

The International Accounting Standards Board is proposing narrow-scope amendments to the classification and measurement requirements for financial instruments.

IFRS 9 specifies how a company should classify and measure financial assets and financial liabilities. The Accounting Standard became effective in January 2018, introducing a new credit impairment model in light of the global financial crisis, and combining classification and measurement requirements, impairment and hedge accounting to replace and improve on IAS 39 Financial Instruments: Recognition and Measurement.

In response to feedback a new exposure draft proposes amendments, which include:

  • Clarifying the classification of financial assets with environmental, social and corporate governance (ESG) and similar features – ESG-linked features in loans could affect whether the loans are measured at amortised cost or fair value, and stakeholders asked how to determine whether such loans have cash flows that are solely payments of principal and interest. To resolve any potential diversity in practice, the proposed amendments clarify how the contractual cash flows on such loans should be assessed. They also look to ensure that investors are provided with useful information about the timing, amount and uncertainty of future cash flows.
  • Settlement of liabilities through electronic payment systems – Stakeholders highlighted challenges about the potential outcomes of applying the derecognition requirements in IFRS 9 to the settlement of a financial asset or a financial liability via electronic cash transfers. The exposure draft proposes clarifications to how this should be accounted for. The IASB also decided to develop an accounting policy option to allow a company to derecognise a financial liability before it delivers cash on the settlement date when specified criteria are met.

IASB chair, Andreas Barckow, said: “The recent post-implementation review of the requirements relating to classification and measurement in IFRS 9 indicated the standard is performing as intended, whilst also addressing some specific areas for enhancement. This exposure draft sets out our proposals in response to this feedback.”

Check out the Snapshot of the proposals at: Snapshot of Exposure Draft: Amendments to the Classification and Measurement of Financial Instruments (