Q1: What is IFRS 9?
IFRS 9 is an International Financial Reporting Standard that provides guidance on the accounting treatment of financial instruments. Financial instruments include items such as derivatives, equity instruments, debt instruments, and investments in other entities.
Q2: What are the main changes brought about by IFRS 9?
The main changes brought about by IFRS 9 include:
- A new classification and measurement approach for financial assets, which is based on the entity's business model for managing those assets and their cash flow characteristics.
- A new expected credit loss (ECL) model for the impairment of financial assets, which requires entities to recognize and measure an allowance for expected credit losses at each reporting date.
- Changes to the hedge accounting requirements, which allow entities to better reflect their risk management activities in the financial statements.
Q3: What is the new classification and measurement approach for financial assets?
The new classification and measurement approach for financial assets is based on the entity's business model for managing those assets and their cash flow characteristics. Financial assets are classified into three categories: amortized cost, fair value through other comprehensive income (FVOCI), and fair value through profit or loss (FVPL).
Q4: What is the new expected credit loss (ECL) model for the impairment of financial assets?
The new ECL model for the impairment of financial assets requires entities to recognize and measure an allowance for expected credit losses at each reporting date. The model is forward-looking and considers the probability of default and the amount of loss that would be incurred if default occurs.
Q5: What are the changes to the hedge accounting requirements?
The changes to the hedge accounting requirements allow entities to better reflect their risk management activities in the financial statements. The changes include allowing entities to designate more types of risk as the hedged risk, removing the requirement for the hedged item to be a single financial instrument, and making it easier to achieve hedge accounting for non-financial risk.
Q6: Who is responsible for ensuring compliance with IFRS 9 requirements?
The entity's management is responsible for ensuring compliance with the requirements of IFRS 9. Auditors are responsible for auditing the entity's compliance with those requirements and reporting on any identified deficiencies.
Q7: Are there any exemptions or exceptions to the requirements of IFRS 9?
IFRS 9 provides limited exemptions for some financial assets, such as certain types of loans and receivables, that are measured at amortized cost. Additionally, IFRS 9 provides limited exemptions for small and medium-sized entities that meet certain criteria.