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IFRS 9: Financial Instruments

IASB meeting summaries and observer notes


 IASB July 2012


 

The IASB discussed the transition and disclosure requirements as a result of the limited amendments to IFRS 9 Financial Instruments.

Transition

The IASB discussed how the classification and measurement (C&M) requirements in IFRS 9 should be applied in light of the limited amendments to IFRS 9, as well as when the limited amendments should be applied. The IASB also discussed the transition to IFRS 9 as a whole considering the interaction between its phases.

Limited amendments to C&M

The IASB tentatively decided that on transition to the amended C&M requirements, an entity should be required to:

  1. retrospectively apply the contractual cash flow characteristics assessment as set out in IFRS 9 (2010) where it is impracticable to apply the amended contractual cash flow characteristics assessment retrospectively; and
  2. disclose the carrying values of the financial assets whose contractual cash flows have been assessed under IFRS 9 (2010) rather than the amended C&M requirements due to impracticability until the affected financial assets are derecognised.

Fourteen IASB members agreed and one IASB member was absent.

The IASB also tentatively agreed that no amendments to the existing IFRS 9 transition requirements are required in the light of either:

  1. the proposed amendments to the business model assessment, or
  2. the proposed extension of the Fair Value Option (FVO) for accounting mismatches to debt instruments that would otherwise be measured at Fair Value Through Other Comprehensive Income (FVOCI).
    Fourteen IASB members agreed and one IASB member was absent.

IFRS 9 as a whole

The IASB tentatively decided to require entities that have already applied IFRS 9 (2009) and/or IFRS 9 (2010) before they apply the limited amendments to IFRS 9 (i) to revoke previous FVO elections if an accounting mismatch no longer exists at initial application of the amended C&M requirements; and (ii) to permit them to apply the FVO to new accounting mismatches created by the initial application of the amended C&M requirements. Fourteen IASB members agreed and one IASB member was absent.

The IASB tentatively decided that once IFRS 9 is finalised, entities should no longer be permitted to early apply previous versions of IFRS 9. Those entities that-prior to the publication of the complete version of IFRS 9-already early applied a previous version of IFRS 9 should be able to continue applying that version and not be required to apply the final requirements until the mandatory effective date. Eight IASB members agreed and one IASB member was absent.

The IASB also tentatively decided that early application of the entire IFRS 9 should be permitted once all of the requirements are issued. Eleven IASB members agreed and one IASB member was absent.

The IASB tentatively decided to re-affirm that comparative C&M information should be permitted, but not required, to be restated, if the information is available without the use of hindsight. Fourteen IASB members agreed and one IASB member was absent.

Presentation and disclosure

The IASB discussed additional presentation and disclosure requirements in the light of proposed limited amendments to IFRS 9, as well as the interaction with the disclosures proposed in the impairment project.

The IASB tentatively decided the following related to the amended contractual cash flow characteristics assessment:

  1. That the judgement involved in the assessment of contractual cash flow characteristics should be added to IAS 1 as an example of a judgement that could have a significant effect on the amounts recognised in the financial statements. Fourteen IASB members agreed and one IASB member was absent.
  2. Not to require quantitative disclosures when the assessment of contractual cash flow characteristics could have a significant effect on the amounts recognised in the financial statements. Nine IASB members agreed and one IASB member was absent.

The IASB tentatively decided the following related to the proposed addition of a FVOCI category for eligible debt instruments:

  1. No new requirements should be added related to the presentation of gains or losses arising from the derecognition of debt instruments measured at FVOCI. Fourteen IASB members agreed and one IASB member was absent.
  2. The impairment disclosures for debt instruments measured at FVOCI should be consistent with those for assets measured at amortised cost, including disclosure of an accumulated impairment amount. Twelve IASB members agreed, two IASB members disagreed and one IASB member was absent.
  3. Presentation of an allowance balance on the face of the statement of financial position should be prohibited for debt instruments measured at FVOCI. Fourteen IASB members agreed and one IASB member was absent.

Date: 7/20/2012