International Financial Reporting Standard 9

• Issued: in 2009; followed by amendments
• Effective date: 1 January 2018
• It replaced IAS 39 Financial Instruments: Recognition and Measurement.
• What it does:
  • It prescribes the rules for recognition, measurement (including impairment), derecognition of financial instruments and hedge accounting.
  • It classifies financial assets into 2 categories:
    1. Financial assets measured at amortized cost;
    2. Financial assets measured at fair value. This category has 2 subcategories:
       1. Financial assets measured at fair value through profit or loss;
       2. Financial assets measured at fair value through other comprehensive income.
  • The classification of financial assets is performed based on two tests:
    1. Business model test; and
    2. Contractual cash flow characteristics test.
  • IFRS 9 classifies financial liabilities into 2 categories:
  • Financial liabilities at amortized cost; and
  • Financial liabilities at fair value through profit or loss; with 2 subcategories:
    1. Held for trading;
    2. Designated at FVTPL upon initial recognition.
  • IFRS 9 describes requirements for subsequent measurement and accounting treatment for each category of financial instruments.
  • It presents the rules for derecognition of financial instruments, with focus on financial assets. It contains the derecognition decision tree to assist in assessment of derecognition criteria.
  • It contains the requirements related to impairment of financial assets. It describes the expected credit loss and both general and simplified approach to implementation of expected credit loss model.
  • It deals with identification and accounting for embedded derivatives.
  • It contains the guidance on hedge accounting. It specifies the accounting treatment for 3 types of hedge relationships:
    1. Cash flow hedge;
    2. Fair value hedge;
    3. Hedge of a net investment in a foreign operation.
  • It contains appendices with definitions and application guidance.

• Summary of IFRS 9 Financial Instruments
• Financial Instruments in general:
  • What is a financial instrument?
  • How to implement IFRS 9
  • IFRS for banks and financial institutions
  • IAS 39 vs. IFRS 9
  • IFRS 9 vs. US GAAP – coming closer?
• Specific transactions related to financial instruments:
  • How new impairment rules in IFRS 9 can affect you
  • Measurement of ECL: probability of default vs loss rate approach – learn about two most common methods applied when measuring ECL, their pros and cons and illustrative examples
  • How to measure probability of default – this article describes a few methods of measuring probability of default (PD) and contains my personal recommendation for external help if you need (discounts for CPDbox subscribers and readers)
  • How to calculate bad debt provision under IFRS 9 – here, you will find step-by-step process of determining the default rates and calculating the provision under IFRS 9
  • How to account for employee loans (below-market interest rate)
  • How to account for intercompany loans? Find out what to do when the documentation is missing, the loan is at no interest, no specified repayment date…
  • Expected credit loss on intercompany loans – learn to apply the newest ECL model
  • Example: ECL model on interest-free on-demand loan
  • How to account for compound financial instruments (IAS 32)
  • How to account for debt factoring/selling of receivables
  • How to Account for Cryptocurrencies in line with IFRS – learn why they are NOT a financial instrument.
• Hedge accounting:
  • Hedge accounting example: cash flow hedge
  • How ignoring hedging can hurt your business
  • Hedge accounting: IAS 39 vs. IFRS 9
  • Hedge accounting IFRS 9: Rebalancing – what is this new concept?
  • Fair value hedge vs. cash flow hedge
  • How to make hedging documentation (with template)

• Case study: Application of IFRS 9 to cash flow hedges (interest rate swaps) – this is an example of a professional advice of our Helpline team (our full answer)
• How to calculate the impairment loss on intercompany loans?
• Can you classify variable-interest loan with collaterals at amortized cost?
• How to present a loan with breached covenants? Is it current or non-current?
• How to account for income from loan application fees?
• How to account for financial guarantees?
• How to test hedge effectiveness?
• What is the difference between a contract asset and an account receivable?
• How to account for investment gold under IFRS?
• Non-controlling interest in a private company– how to account for your investment that is not publicly traded?
• Accounting for loan refinancing fees– should you recognize the refinancing fee in profit or loss?
• Accounting for gain or loss on sale of shares classified at FVOCI
• Measurement of trade receivables under IFRS 9– how do you classify trade receivables and how do you measure them initially, especially when they are not interest bearing?
• Are income tax advances financial instruments?– should you apply IFRS 9?

• IFRS Kit – learn IFRS in 150+ videos, 150+ excel case studies, quizzes, certificates
• Expected Credit Loss for Accountants – highly specialized course focused on ECL under IFRS 9 with step-by-step example related to trade receivables, many practical insights included.

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