On 12 November 2009, the International Accounting Standards Board (IASB) issued IFRS 9 Financial Instruments.
Salient differences between IAS 39 and IFRS 9 |
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Parameter |
IAS 39 |
IFRS 9 |
Name |
Financial Instruments: |
Financial Instruments |
Applicability |
Currently effective |
Effective from 1st Jan 2013 with early adoption permitted |
Scope |
All aspects of Financial |
Only Financial assets included. Presently the standard does not include Financial liabilities, derecognition of financial instruments, impairment and hedge accounting |
Classification |
Fair Value Through Profit & Loss (FVPL) Available-for-sale (AFS) Held-to-maturity (HTM) Loan and Receivable (LAR) |
Fair Value Through Profit & Loss (FVPL) Amortised Cost (AC) |
Classification |
Fair Value Through Profit Available-for-sale (AFS) |
Fair Value Through Profit & Loss (FVPL) Fair Value Through Other Comprehensive Income (FVOCI) |
Basis of classification |
Intention to hold till maturity, trading for short term profits, derivative, loan or receivable, or intentional designation subject to certain restrictions |
Classification based on business model and the contractual cash flow characteristics |
Measurement |
Measured at amortised cost if classified as held-to-maturity or as loan or receivable. Other classifications are measured at fair value. |
Measured at amortised cost (AC) if business model objective is to Debt instruments meeting the above criteria can still be measured at fair value through profit or loss (FVPL) if such designation would eliminate or reduce accounting mismatch. If not, measured at fair value through profit or loss (FVPL) |
Measurement |
Measured at fair value. Exception: Unquoted equity |
Measured at fair value through profit or loss. An entity can irrevocably designate at initial recognition as fair value through other comprehensive income, provided the equity investment is not held for trading. |
Embedded |
Embedded derivatives are |
No bifurcation of asset. The financial asset is assessed in its entirety as to the contractual cash flows and if any of its cash flows do not represent either payments of principal or interest then the whole asset is measured at FVPL. |
Fair value option |
An entity can designate a financial asset to be measured at fair value on initial recognition. The entity has the freedom to do so and need not satisfy any other criteria |
A financial asset can be designated as FVPL on initial recognition only |
Reclassifications |
Reclassification between the various four categories allowed under specific circumstances with the gain/loss being treated differently depending upon the movement between the classifications. Reclassification from held-to-maturity (HTM) is viewed seriously if does not fall within the permitted exceptions. |
If entity’s business model objective changes, reclassification is permitted between FVPL and AC or vice versa. Such changes should be demonstrable to external parties and are expected to be very infrequent. |
Reclassifications |
Reclassification is permitted between the FVPL and AFS. When transferred from AFS to FVPL, unrealized gain/loss is recognized in P&L based on fair value. When transferred from FVPL to AFS, no reversal of gain/loss recognized as unrealized is permitted. However all gain/loss on disposal of AFS are recognized in P&L by transfer from equity. |
Reclassification between FVPL and FVOCI not permitted as FVOCI classification is done at the Only dividend income is recognized in P&L of assets designated as FVOCI. Even on disposal of such assets, the gain/loss is not transferred from equity, but remains permanently in equity. |
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