IFRS 9 This Basis for Conclusions accompanies IFRS 9 Financial Instruments

340 Pages·2016·2.92 MB·English

IFRS 9
This Basis for Conclusions accompanies IFRS 9 Financial Instruments (issued July 2014) and is published by the
International Accounting Standards Board (IASB).
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ISBN: 978-1-909704-47-3
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© IFRS Foundation 1
IFRS 9
Approval by the Board of IFRS 9 issued in November 2009
International Financial Reporting Standard 9 Financial Instruments was approved for issue by thirteen of the fifteen
members of the International Accounting Standards Board. Mr Leisenring and Ms McConnell dissented from the issue
of the Standard. Their dissenting opinions are set out after the Basis for Conclusions.
Sir David Tweedie Chairman
Stephen Cooper
Philippe Danjou
Jan Engström
Patrick Finnegan
Robert P Garnett
Gilbert Gélard
Amaro Luiz de Oliveira Gomes
Prabhakar Kalavacherla
James J Leisenring
Patricia McConnell
Warren J McGregor
John T Smith
Tatsumi Yamada
Wei-Guo Zhang
2 © IFRS Foundation
IFRS 9
Approval by the Board of the requirements added to IFRS 9 in October
2010
The requirements added to International Financial Reporting Standard 9 Financial Instruments in October 2010 were
approved for issue by fourteen of the fifteen members of the International Accounting Standards Board (IASB).
Mr Scott abstained in view of his recent appointment to the IASB.
Sir David Tweedie Chairman
Stephen Cooper
Philippe Danjou
Jan Engström
Patrick Finnegan
Amaro Luiz de Oliveira Gomes
Prabhakar Kalavacherla
Elke König
Patricia McConnell
Warren J McGregor
Paul Pacter
Darrel Scott
John T Smith
Tatsumi Yamada
Wei-Guo Zhang
© IFRS Foundation 3
IFRS 9
Approval by the Board of Mandatory Effective Date of IFRS 9 and
Transition Disclosures (Amendments to IFRS 9 (2009), IFRS 9 (2010) and
IFRS 7) issued in December 2011
Mandatory Effective Date of IFRS 9 and Transition Disclosures (Amendments to IFRS 9 (2009), IFRS 9 (2010) and
IFRS 7) was approved for publication by fourteen of the fifteen members of the International Accounting Standards
Board. Ms McConnell dissented from the issue of the amendments. Her dissenting opinion is set out after the Basis
for Conclusions.
Hans Hoogervorst Chairman
Ian Mackintosh Vice-Chairman
Stephen Cooper
Philippe Danjou
Jan Engström
Patrick Finnegan
Amaro Luiz de Oliveira Gomes
Prabhakar Kalavacherla
Elke König
Patricia McConnell
Takatsugu Ochi
Paul Pacter
Darrel Scott
John T Smith
Wei-Guo Zhang
4 © IFRS Foundation
IFRS 9
Approval by the Board of IFRS 9 Financial Instruments (Hedge
Accounting and amendments to IFRS 9, IFRS 7 and IAS 39) issued in
November 2013
IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39) was approved for
issue by fifteen of the sixteen members of the International Accounting Standards Board. Mr Finnegan dissented. His
dissenting opinion is set out after the Basis for Conclusions.
Hans Hoogervorst Chairman
Ian Mackintosh Vice-Chairman
Stephen Cooper
Philippe Danjou
Martin Edelmann
Jan Engström
Patrick Finnegan
Amaro Luiz de Oliveira Gomes
Gary Kabureck
Prabhakar Kalavacherla
Patricia McConnell
Takatsugu Ochi
Darrel Scott
Chungwoo Suh
Mary Tokar
Wei-Guo Zhang
© IFRS Foundation 5
IFRS 9
Approval by the Board of IFRS 9 Financial Instruments issued in July
2014
IFRS 9 Financial Instruments (as issued in July 2014) was approved for issue by fourteen of the sixteen members of
the International Accounting Standards Board. Messrs Cooper and Engström dissented. Their dissenting opinion is set
out after the Basis for Conclusions.
Hans Hoogervorst Chairman
Ian Mackintosh Vice-Chairman
Stephen Cooper
Philippe Danjou
Martin Edelmann
Jan Engström
Patrick Finnegan
Amaro Luiz de Oliveira Gomes
Gary Kabureck
Suzanne Lloyd
Patricia McConnell
Takatsugu Ochi
Darrel Scott
Chungwoo Suh
Mary Tokar
Wei-Guo Zhang

6 © IFRS Foundation
IFRS 9 BC
CONTENTS
from paragraph
BASIS FOR CONCLUSIONS ON
IFRS 9 FINANCIAL INSTRUMENTS
INTRODUCTION BCIN.1
SCOPE (CHAPTER 2) BC2.1
Loan commitments BCZ2.2
Financial guarantee contracts BCZ2.9
Contracts to buy or sell a non-financial item BCZ2.18
Accounting for a contract to buy or sell a non-financial item as a derivative BCZ2.19
Business combination forward contracts BCZ2.39
RECOGNITION AND DERECOGNITION (CHAPTER 3) BCZ3.1
Derecognition of a financial asset BCZ3.1
Exposure draft of proposed amendments to IAS 39 published in 2002 BCZ3.4
Comments received BCZ3.6
Revisions to IAS 39 BCZ3.8
Arrangements under which an entity retains the contractual rights to receive the cash
flows of a financial asset but assumes a contractual obligation to pay the cash flows to
one or more recipients BCZ3.14
Transfers that do not qualify for derecognition BCZ3.25
Continuing involvement in a transferred asset BCZ3.27
Improved disclosure requirements issued in October 2010 BC3.30
CLASSIFICATION (Chapter 4) BC4.1
Classification of financial assets BC4.1
Classification of financial liabilities BC4.46
Option to designate a financial asset or financial liability at fair value through
profit or loss BCZ4.54
Embedded derivative BC4.83
Reclassification BC4.111
Limited amendments for financial assets (July 2014) BC4.124
MEASUREMENT (CHAPTER 5) BCZ5.1
Fair value measurement considerations BCZ5.1
Gains and losses BCZ5.21
Amotised cost measurement BCZ5.65
Impairment BCZ5.82
HEDGE ACCOUNTING (CHAPTER 6) BC6.76
The objective of hedge accounting BC6.76
Hedging instruments BC6.117
Hedged items BC6.154
Qualifying criteria for hedge accounting BC6.230
Accounting for qualifying hedging relationships BC6.272
Hedges of a group of items BC6.427
Hedging credit risk and using credit derivatives BC6.469
EFFECTIVE DATE AND TRANSITION (CHAPTER 7) BC7.1
Effective date BC7.1
Transition related to IFRS 9 as issued in November 2009 BC7.10
Transition related to the requirements added to IFRS 9 in October 2010 BC7.26
Transitional insurance issues BC7.30
©IFRS Foundation 7
IFRS 9 BC
Disclosures on transition from IAS 39 to IFRS 9 –November 2011 BC7.34A
Transition related to the requirements added to IFRS 9 in November 2013 BC7.35
Transition related to the requirements added to IFRS 9 in July 2014 BC7.53
ANALYSIS OF THE EFFECTS OF IFRS 9 BCE.1
Introduction BCE.1
Analysis of the effects: Classification and measurement BCE.7
Analysis of the effects: Impairment BCE.90
Analysis of the effects: Hedge accounting BCE.174
GENERAL
Summary of main changes from the Exposure Draft Financial Instruments:
Classification and Measurement BCG.1
Summary of main changes from the Exposure Draft Fair Value Option for Financial
Liabilities BCG.2
DISSENTING OPINIONS DO1
APPENDICES
A Previous dissenting opinions
B Amendments to the Basis for Conclusions on other Standards

8 ©IFRS Foundation
IFRS 9 BC
Basis for Conclusions on
IFRS 9 Financial Instruments
This Basis for Conclusions accompanies, but is not part of, IFRS 9.
IFRS 9 replaced IAS 39 Financial Instruments: Recognition and Measurement. When revised in 2003 IAS 39 was
accompanied by a Basis for Conclusions summarising the considerations of the IASB as constituted at the time, in
reaching some of its conclusions in that Standard. That Basis for Conclusions was subsequently updated to reflect
amendments to the Standard. For convenience the IASB has incorporated into its Basis for Conclusions on IFRS 9
material from the Basis for Conclusions on IAS 39 that discusses matters that the IASB has not reconsidered. That
material is contained in paragraphs denoted by numbers with the prefix BCZ. In those paragraphs cross-references to
the Standard have been updated accordingly and minor necessary editorial changes have been made. In 2003 and
later some IASB members dissented from the issue of IAS 39 and subsequent amendments, and portions of their
dissenting opinions relate to requirements that have been carried forward to IFRS 9. Those dissenting opinions are
set out in an appendix after this Basis for Conclusions.
Paragraphs describing the IASB’s considerations in reaching its own conclusions on IFRS 9 are numbered with the
prefix BC.
Introduction
BCIN.1 This Basis for Conclusions summarises the considerations of the International Accounting Standards Board
(IASB) when developing IFRS 9 Financial Instruments. Individual IASB members gave greater weight to
some factors than to others.
BCIN.2 The IASB has long acknowledged the need to improve the requirements for financial reporting of financial
instruments to enhance the relevance and understandability of information about financial instruments for
users of financial statements. That need became more urgent in the light of the global financial crisis that
started in 2007 (‘the global financial crisis’), so the IASB decided to replace IAS 39 Financial Instruments:
Recognition and Measurement in its entirety as expeditiously as possible. To do this the IASB divided the
project into several phases. In adopting this approach, the IASB acknowledged the difficulties that might be
created by differences in timing between this project and others, in particular the project on insurance
contracts.
Classification and measurement
BCIN.3 IFRS 9 is a new Standard that deals with the accounting for financial instruments. When developing
IFRS 9, the IASB considered the responses to its 2009 Exposure Draft Financial Instruments:
Classification and Measurement (the ‘2009 Classification and Measurement Exposure Draft’).
BCIN.4 That 2009 Classification and Measurement Exposure Draft contained proposals for all items within the
scope of IAS 39. However, some respondents said that the IASB should finalise its proposals on the
classification and measurement of financial assets while retaining the existing requirements for financial
liabilities (including the requirements for embedded derivatives and the fair value option) until the IASB
had more fully considered the issues relating to financial liabilities. Those respondents pointed out that the
IASB had accelerated its project on financial instruments because of the global financial crisis, which had
placed more emphasis on issues in the accounting for financial assets than for financial liabilities. They
suggested that the IASB should consider issues related to financial liabilities more closely before finalising
the requirements for classification and measurement of financial liabilities.
BCIN.5 The IASB noted those concerns and, as a result, in November 2009 it finalised the first chapters of IFRS 9,
dealing with the classification and measurement of financial assets. In the IASB’s view, requirements for
classification and measurement are the foundation for a financial reporting standard on accounting for
financial instruments, and the requirements on associated matters (for example, on impairment and hedge
accounting) have to reflect those requirements. In addition, the IASB noted that many of the application
issues that arose in the global financial crisis were related to the classification and measurement of financial
assets in accordance with IAS 39.
©IFRS Foundation 9
IFRS 9 BC
BCIN.6 Thus, financial liabilities, including derivative liabilities, initially remained within the scope of IAS 39.
Taking that course enabled the IASB to obtain further feedback on the accounting for financial liabilities,
including how best to address accounting for changes in own credit risk.
BCIN.7 Immediately after issuing IFRS 9, the IASB began an extensive outreach programme to gather feedback on
the classification and measurement of financial liabilities. The IASB obtained information and views from
its Financial Instruments Working Group (FIWG) and from users of financial statements, regulators,
preparers, auditors and others from a range of industries across different geographical regions. The primary
messages that the IASB received were that the requirements in IAS 39 for classifying and measuring
financial liabilities were generally working well but that the effects of the changes in a liability’s credit risk
ought not to affect profit or loss unless the liability is held for trading. As a result of the feedback received,
the IASB decided to retain almost all of the requirements in IAS 39 for the classification and measurement
of financial liabilities and carry them forward to IFRS 9 (see paragraphs BC4.46–BC4.53).
BCIN.8 By taking that course, the issue of accounting for the effects of changes in credit risk does not arise for most
liabilities and would remain only in the context of financial liabilities designated as measured at fair value
under the fair value option. Thus, in May 2010, the IASB published the Exposure Draft Fair Value Option
for Financial Liabilities (the ‘2010 Own Credit Risk Exposure Draft’), which proposed that the effects of
changes in the credit risk of liabilities designated under the fair value option would be presented in other
comprehensive income. The IASB considered the responses to the 2010 Own Credit Risk Exposure Draft
and finalised the requirements, which were then added to IFRS 9 in October 2010.
BCIN.9 In November 2012 the IASB published the Exposure Draft Classification and Measurement: Limited
Amendments to IFRS 9 (Proposed amendments to IFRS 9 (2010)) (the ‘2012 Limited Amendments
Exposure Draft’). In that Exposure Draft, the IASB proposed limited amendments to the classification and
measurement requirements in IFRS 9 for financial assets with the aims of:
(a) considering the interaction between the classification and measurement of financial assets and the
accounting for insurance contract liabilities;
(b) addressing specific application questions that had been raised by some interested parties since
IFRS 9 was issued; and
(c) seeking to reduce key differences with the US national standard-setter, the Financial Accounting
Standards Board’s (FASB) tentative classification and measurement model for financial
instruments.
BCIN.10 Accordingly, the 2012 Limited Amendments Exposure Draft proposed limited amendments to clarify the
application of the existing classification and measurement requirements for financial assets and to introduce
a fair value through other comprehensive income measurement category for particular debt investments.
Most respondents to the 2012 Limited Amendments Exposure Draft—as well as participants in the IASB’s
outreach programme—generally supported the proposed limited amendments. However, many asked the
IASB for clarifications or additional guidance on particular aspects of the proposals. The IASB considered
the responses in the comment letters and the information received during its outreach activities when it
finalised the limited amendments in July 2014.
Amortised cost and impairment methodology
BCIN.11 In October 2008, as part of a joint approach to dealing with the financial reporting issues arising from the
global financial crisis, the IASB and the FASB set up the Financial Crisis Advisory Group (FCAG). The
FCAG considered how improvements in financial reporting could help to enhance investor confidence in
financial markets. In its report, published in July 2009, the FCAG identified weaknesses in the current
accounting standards for financial instruments and their application. Those weaknesses included the delayed
recognition of credit losses on loans (and other financial instruments) and the complexity of multiple
impairment approaches. One of the FCAG’s recommendations was to explore alternatives to the incurred
credit loss model that would use more forward looking information.
BCIN.12 Following a Request for Information that the IASB posted on its website in June 2009, the IASB published,
in November 2009, the Exposure Draft Financial Instruments: Amortised Cost and Impairment (the ‘2009
Impairment Exposure Draft’). Comments received on the 2009 Impairment Exposure Draft and during
outreach indicated support for the concept of such an impairment model, but highlighted the operational
difficulties of applying it.
BCIN.13 In response, the IASB decided to modify the impairment model proposed in the 2009 Impairment Exposure
Draft to address those operational difficulties while replicating the outcomes of that model that it proposed
in that Exposure Draft as closely as possible. These simplifications were published in the Supplementary
10 ©IFRS Foundation