There is increased emphasis on fair value accounting and reporting, which is regarded as both relevant and reliable information to those interested in financial reports. IFRS 9 has also reduced the degree of discretion for classification and accounting treatment of financial assets, which should support consistent reporting of financial information relating to financial assets and enhance understanding and comparability of that information. If we begin with the classification of financial assets, IFRS 9 now classifies financial assets under three headings as follows:. This classification includes any financial assets held for trading purposes and also derivatives, unless they are part of a properly designated hedging arrangement.
Essential IFRS 9 Impairment Solutions.
IFRS 9: Classifying and Staging Financial Assets | FRG
You need to Sign in to use this feature. IFRS 9 is effective for annual periods beginning on or after 1 January with early application permitted. IFRS 9 specifies how an entity should classify and measure financial assets, financial liabilities, and some contracts to buy or sell non-financial items. IFRS 9 requires an entity to recognise a financial asset or a financial liability in its statement of financial position when it becomes party to the contractual provisions of the instrument. At initial recognition, an entity measures a financial asset or a financial liability at its fair value plus or minus, in the case of a financial asset or a financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or the financial liability. When, and only when, an entity changes its business model for managing financial assets it must reclassify all affected financial assets.
Adopting IFRS 9: A case study for insurers
Its new impairment requirements will affect almost all entities and not just large financial institutions. Where entities have material trade receivable, contract asset and lease receivable balances care is needed to ensure that an appropriate process is put in place to calculate the expected credit losses. IFRS 9 introduces a new impairment model based on expected credit losses. In accordance with the requirements of IAS 39 , impairment losses on financial assets measured at amortised cost were only recognised to the extent that there was objective evidence of impairment. In other words, a loss event needed to occur before an impairment loss could be booked.
This case study looks at the new reporting standard requirements using the real-life experience of an insurance client of J. Morgan and Clearwater Analytics. This case study looks at the experience of an insurance company that made the move to IFRS 9 with help from its asset manager, J.