United States

IASB publishes final version of IFRS 9


The International Accounting Standards Board (IASB) recently published the final version of International Financial Reporting Standard (IFRS) 9, Financial Instruments, which brings together the classification and measurement, impairment and hedge accounting phases of the IASB's project to replace International Accounting Standard (IAS) 39, Financial Instruments: Recognition and Measurement. Highlights of the final version of IFRS 9 include:

  • The standard is built on a single principle-based classification and measurement approach for financial assets that reflects the business model in which they are managed and their cash flow characteristics.
  • IFRS 9 uses a single forward-looking expected credit loss impairment model that is applicable to all financial instruments subject to impairment accounting and will require more timely recognition of expected credit losses.
  • The standard addresses the "own credit" issue by not allowing entities to recognize 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. Changes in fair value attributable to an entity's own credit risk are required to be recognized in other comprehensive income. 
  • IFRS 9 also introduces a substantially reformed hedge accounting model that better aligns the accounting treatments with the economics of risk management and provides for enhanced disclosures about risk management activities.

IFRS 9 is effective for annual periods beginning on or after January 1, 2018. Early application is permitted. Also, the changes related to "own credit" issues can be early adopted in isolation without otherwise changing the accounting for financial instruments.