Category: C3 – IFRS 9

Although non-financial items fall outside the scope of IFRS 9, if those contracts can be settled net in cash, then they are within the scope of IFRS 9 (subject to an exception). This is because these contracts meet the definition of a derivative. The exception is where, despite the ability to settle net, the entity … Continue reading IFRS 9 – Own Use Contracts →

The simplified approach does not require an entity to track the changes in credit risk, but instead, requires the entity to recognize a loss allowance based on lifetime ECLs at each reporting date, right from origination. An entity is required to apply the simplified approach for trade receivables or contract assets that result from transactions … Continue reading IFRS 9 – IMPAIRMENT – SIMPLIFIED APPROACH →

Some contracts (that may or may not be financial instruments themselves) may have derivatives embedded in them. For example, an entity may issue a bond which is redeemable in five years' time with part of the redemption price being based on the increase in the FTSE 100 index. IFRS 9 requires embedded derivatives that would … Continue reading IFRS 9 – EMBEDDED DERIVATIVES →

IFRS 9 requires equity investments (except those accounted under the equity method of accounting or those related to a consolidated investee), to be measured at FV. In limited circumstances, IFRS 9 permits an entity to use the cost as an appropriate estimate of the FV of unquoted equity investments. For example: When insufficient more recent information is available to measure fair value;When there is a … Continue reading IFRS 9 – MEASUREMENT OF UNQUOTED SHARES →

Under IFRS 9, one important condition for a financial asset to qualify for amortized cost classification is that the financial asset must meet the “SPPI” contractual cash flow characteristics test. Contractual cash flows are considered to be SPPI, if the contractual terms of the financial asset only give rise to cash flows that are solely … Continue reading IFRS 9 – The ‘SPPI’ test →

Under the previous standard (IAS 39), any movement in the fair value of financial liabilities designated at FVTPL, is always recognized in profit and loss. IFRS 9 modifies this requirement to specify that the portion of the change attributable to changes in the entity’s own credit risk (i.e. the risk of default on the debt) is … Continue reading IFRS 9 – FINANCIAL LIABILITIES DESIGNATED AT FVTPL →

In this article we shall dive into one of the trickiest parts of the specific standard. The question to be addressed below is: how can we eliminate/reduce an accounting mismatch? Example 1 ABC Ltd, an investment property company, adopts the fair value model to measure its investment properties. The fair value of the investment properties … Continue reading IFRS 9 – HOW TO REDUCE/ELIMINATE AN ACCOUNTING MISMATCH →

Financial guarantee contracts (FGCs) are a form of financial insurance and are governed by IFRS 9. The entity basically guarantees it will make a payment to another party if a specified debtor does not pay that other party. FGCs are recognized as a financial liability at the time the guarantee is issued. The liability is … Continue reading IFRS 9 – FINANCIAL GUARANTEE CONTRACTS →