On 24 July 2014 the IASB published the complete version of IFRS 9 Financial Instruments, which replaces most of the guidance in IAS 39. This includes amended guidance for the classification and measurement of financial assets by introducing a fair value through other comprehensive income category for certain debt instruments. It also contains a new impairment model which will result in earlier recognition of losses.
No changes were introduced for the classification and measurement of financial liabilities, except for the recognition of changes in own credit risk in other comprehensive income for liabilities designated at fair value through profit or loss. It also includes the new hedging guidance that was issued in November 2013. These changes are likely to have a significant impact on entities that have significant financial assets and in particular financial institutions. IFRS 9 will be effective for annual periods beginning on or after 1 January 2018, subject to endorsement in certain territories.
This video looks at the main challenges introduced by the new IFRS 9 and their practical implications. In particular:
- Classification and measurement of debt instruments.
- Expected credit losses model.
- Key considerations for the assessment of a significant increase in credit risk.
- Calculating ECL.
- Operational simplifications for ECL model.
- Accounting policy choice and transition rules.
This helps companies understand the new challenges and how they will impact their financial statements. The video is presented by Gail Tucker, Financial Instruments Leader of PwC's Global Accounting Consulting Services and John Mc Donnell, partner in PwC's Banking Assurance & Advisory Services.
If you have questions on the issues discussed, please get in touch with your local PwC contact.
For more information see In depth INT2014-05 and In depth INT2014-06.