IASB proposes limited changes to IFRS 9 classification and measurement requirements

by Richard Crump

More from this author

29 Nov 2012

  • Comments
Hans Hoogervorst IASB chairman

LIMITED CHANGES to international accounting rule governing the classification and measurement requirements of financial instruments have been proposed by the IASB.

The global standard setter is proposing changes to IFRS 9 as part of a wider project with US counterpart FASB to reform accounting rules for financial instruments.

The IASB published new classification and measurement requirements for financial assets in 2009 and for financial liabilities in 2010. However, in January 2012 the IASB decided to consider limited amendments in order to clarify a narrow range of application questions, reduce the differences with FASB's model, and take into account the interaction between the classification and measurement of financial assets and the accounting for insurance contract liabilities.

The IASB said changes were kept to a minimum because IFRS 9 is "fundamentally sound" and some entities have already adopted, or prepared to adopt, the standard as previously published.

"We were clear when IFRS 9 was introduced in 2009 that it would be necessary to consider revisiting the interaction between IFRS 9 and the insurance contracts project once the insurance contract model was developed sufficiently," said Hans Hoogervorst, chairman of the IASB [pictured]. "In addition, this limited-scope review has given us an opportunity to propose aligning IFRS and US GAAP more closely, in this important area of financial reporting."

The exposure draft, which is open for comment until 28 March 2013, proposes the introduction of a fair value through other comprehensive income (FVOCI) measurement category for debt instruments that would be based on an entity's business model.

Some financial assets that an entity previously expected to measure at amortised cost under the existing IFRS 9 model may have to be classified in this new category, which could increase volatility in reported equity and, for financial institutions, regulatory capital.

"The new category will be welcomed by many in the insurance industry, as it is intended to dovetail with the IASB's tentative decision that changes in insurance liabilities driven by changes in discount rates also should be excluded from P&L. However, the debate will continue as to whether the IASB has found the best overall package to try to minimise accounting mismatches," said Chris Spall, partner in KPMG International Standards Group.

"Companies, in particular financial institutions, should start re-looking at their financial assets and at how the proposed amendments might impact them. Although these amendments are labelled ‘limited', they could have far-reaching implications for an entity's financial reporting."

Visitor comments

blog comments powered by Disqus

Add your comment

We won't publish your address

By submitting a comment you agree to abide by our Terms & Conditions

Your comment will be moderated before publication

  • Send

Charterhouse Accountants

Finance Officer

Charterhouse Accountants, Beaconsfield, Permanent, Full Time, £ Competitive




Get the latest financial news sent directly to your inbox

  • Best Practice
  • Business
  • Daily Newsletter
  • Essentials


Search for jobs
Click to search our database of all the latest accountancy roles

Create a profile
Click to set up your profile and let the best recruiters find you

Jobs by email
Sign up to receive regular updates with the latest roles suitable for you



Why budgeting fails: One management system is not enough

If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.


iXBRL: Taking stock. Looking forward

In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.