Final phase of new IFRS 9 now complete

By: Jason Goh

The new International Financial Reporting Standard 9 (IFRS 9) is built on a logical, single classification and measurement approach. It’s meant for financial assets that reflect 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 provides more timely recognition of losses. This single model is applicable to all financial instruments subject to impairment accounting.

In addition, IFRS 9 addresses the ‘own credit’ issue. Own credit is when financial institutions 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. IFRS 9 also includes an improved hedge accounting model to better link the economics of risk management with its accounting treatment.
IFRS 9 is effective for annual periods beginning on or after 1 January, 2018. However, the standard is available for early application. In addition, the own credit changes can be applied early in isolation without otherwise changing the accounting for financial instruments.

Phase 1 - Classification and Measurement

IFRS 9 introduces a single classification and measurement model dependent on:

  • The entity’s business model objective for managing financial assets, and
  • The contractual cash flow characteristics of financial assets

Type of classification:

  • Amortized cost
  • Fair value through other comprehensive income (FVOCI)
  • Fair value through profit and loss
IFRS

Phase 2 - Impairment

IFRS 9 creates a forward-looking impairment model to recognize expected losses based on 3 stages:

IFRS

Phase 3 – Hedge Accounting

Incorporated major overhaul of hedge accounting and introduce significant improvements, principally by aligning the accounting more closely with risk management.  As a
principle-based approach, IFRS 9 looks at whether a risk component can be identified and measured.

IFRS 9 overhauls hedge accounting and introduces significant improvements by aligning the accounting more closely with risk management. As a principle-based approach, IFRS 9 looks at whether a risk component can be identified and measured.
Does your business have the right technology and expertise to ensure success in this new reporting standard landscape? If not, we can help.

Conclusion
SS&C leverages proprietary technology and expertise to deliver outsourcing services to meet your business objectives. To learn how we can help you successfully navigate IFRS 9 and other reporting standards, contact us at solution@sscinc.com.