W. consulting will hold your hand through the changes that IFRS 9 has brought.
Since 2014, we’ve known about the International Accounting Standards Board’s final version of IFRS 9: Financial Instruments, which replaces the old version and IAS 39. The new standard brings together the classification and measurement, impairment and hedge accounting requirements for financial instruments. It’s been effective since January 2018.
IFRS 9 is streamlined and provides a robust framework but may still be intimidating, says W. consulting’s Bruce Mackenzie. Change, he says, is the new normal. Here’s what to expect:
Financial assets
There are three classification categories in IFRS 9 (compared to IAS 39’s four) and how the company or organisation manages financial assets will impact the classification. So do you sell financial assets, collect contractual cash flows, or both?
Financial liabilities
This classification is largely unchanged, but IFRS 9 introduces new requirements for the accounting and presentation of financial liabilities where the company chooses to measure financial liabilities at fair value through profit and loss. This profit or loss at fair value must be presented in other comprehensive income.
Impairment
IFRS 9 introduces the expected credit loss model for determining impairments. The model is forward looking, so that it is no longer necessary for a trigger event to have occurred before credit losses are recognised.
Hedge accounting
This category has been fundamentally revised and is more principled. Disclosure explaining the risk management strategy and the effect hedge accounting has on financial statements is compulsory. Disclosure on the effect that hedge accounting has on the financial statements is required, with all hedge information disclosed in one place in the notes.
Hedged items include some non-financial instruments. Hedged instruments can now include any non-derivative financial instruments.
Daunted? Your company may need guidance through this transition. Visit the CFO SA Training page to find out more about training offered by W.consulting. You’ll qualify for a 10 percent discount if you sign up with the code CFO2018.
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