IFRS 9 changes.
In summary, IFRS 9 will replace IAS 39 Financial Instruments and bring together the following aspects of accounting for financial instruments: classification and measurement; impairment; and hedge accounting.
IFRS 9 is relevant to many different companies but will have the greatest effect on financial institutions.
In practice, the most significant change will be in the way financial institutions account for loan losses. IFRS 9 replaces the incurred loan loss model of IAS 39 with an expected loan loss model. The new model is likely to result in greater loan loss provisions by financial institutions and will provide investors with useful information on changes in credit risk exposure.
IFRS 15 changes.
IFRS 15 will replace IAS 18 Revenue and IAS 11 Construction Contracts. It will establish a comprehensive framework for determining when to recognise revenue and how much revenue to recognise. It is expected to increase comparability among companies across sectors and markets. IFRS 15 will affect almost all companies because it covers revenue from all contracts with customers, except for revenue from leases, financial instruments and insurance contracts.
Heads up for investors.
Investors should find useful information in the notes to companies’ financial statements about the expected impact of a new Standard even before companies apply that Standard (this is a requirement in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors). For IFRS 9 this might include information about how loan loss provisions are likely to change, and for IFRS 15 it might include information about the likely effects on the amount or timing of revenue recognition. Implementation assistance for companies.
The Board provides educational materials to assist companies applying an IFRS Standard for the first time. Examples of such materials include articles, videos and web presentations.
Furthermore, both IFRS 9 and IFRS 15 were supported by Transition Resource Groups (TRG)—public discussion forums established to provide support for stakeholders on implementation issues arising from the new Standards.
The International Accounting Standards Board (Board) today has published for public comment a Discussion Paper on how companies issuing financial instruments should classify them in their financial statements. IAS 32 Financial Instruments: Presentation currently sets out how a company that issues financial instruments should distinguish financial liabilities from equity instruments. That distinction is important because the classification of the instruments affects how a company’s financial position and performance are depicted. IAS 32 works well for most financial instruments. However, continuing financial innovation means that some companies find it challenging to classify some complex financial instruments that combine some features of both debt—liabilities—and ordinary shares—equity instruments. Challenges in classifying these instruments can result in diverse accounting in practice, which in turn makes it difficult for investors to assess and...
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