If you, like many others, have never heard of IFRS 9, but will come into contact with it, this article is helpful. You will find in this article the basic description of this term. This allows you to know more about the term and you can apply it more easily. At the bottom of this article you will also find a useful link to a website where you can read more about IFRS 9.
What does IFRS 9 mean?
In 2014, the International Accounting Standards Board published IFRS 9. It is a standard for the reporting of financial instruments and largely replaces IAS 39. This new standard has become effective for fiscal years beginning on or after January 1, 2018.
IAS 39 was replaced because it was difficult to apply by many financial institutions. In addition, the standard was also difficult to interpret by institutions. IFRS 9 should therefore make the reporting of financial instruments easier, so that you can also compare easily. Do you work for a financial institution? Then it is wise to dive deeper into the information surrounding this standard.
IFRS 9 consists of three main parts:
- Classification and measurement
- Hedge accounting
The first part is classification and measurement. This covers the accounting rules for the valuation and classification of financial assets. You must measure all financial assets at amortized cost, fair value through other comprehensive income, and fair value through the income statement.
The second component is impairment. Under IFRS 9 there are requirements for a new impairment model. With this model you recognize credit losses earlier. With this new standard, this is an expected loss model. This was different with IAS 39. At that time you assumed the realized loss. This new model gives you more information to use for your financial statement of expected credit losses. This allows you to see the risks earlier than with the old model. With the old model, you often didn’t know until after the fact. Whereas foresight is governing.
Now it’s the turn of the third component: hedge accounting. The requirements for hedge accounting under IFRS 9 make hedge accounting easier. The aim is also to bring hedge accounting into line with the activities you do around risk management. But it also helps to provide you with information so that you can make strategic choices within risk management. By using the hedge accounting model, you, as a financial institution, are better able to map out your financial statements.
More information about this subject?
Would you like to read more about this? On annualreporting.info you will not only find information about this standard, but also about other important standards. On the website you can find all information in alphabetical order. But you also discover more on the website about the IFRS standards, what jargon is used and what the definitions mean exactly. For example, on the site you will find thirty sections about IFRS 9, so that you can get answers to your questions. Annual Reporting is therefore the site to go to for a complete overview of all your IFRS questions.