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IFRS 9 Financial Instruments

February 2016 - FRC responds to the IASB ED ‘Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts’
The FRC response to the IASB ED Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts can be downloaded here
 
July 2014 - IASB issues IFRS 9 Financial Instruments

On 24 July 2014 the IASB issued IFRS 9 Financial Instruments.
Click here to access the IASB’s press release.

Click here to access the FRC’s press release.


April 2014 - IASB issues Discussion Paper Accounting for Dynamic Risk Management: a Portfolio Revaluation Approach to Macro Hedging
 
On 17 April 2014 the IASB issued Discussion Paper Accounting for Dynamic Risk Management: a Portfolio Revaluation Approach to Macro Hedging.
 
Click here for the FRC response to the IASB's Discussion Paper.
 
September 2013 - FRC responses and EFRAG and National Standard Setters report on the findings of field-testing
 
IASB ED Financial Instruments:  Expected Credit Losses
A report on the findings of the field-test on the IASB ED  Financial Instruments: Expected Credit Losses, is now available from the EFRAG website.
FRC comment letter to the IASB ED  Financial Instruments: Expected Credit Losses can be downloaded here.
IASB ED Classification and Measurement: Limited Amendements to IFRS 9
 
A report on the findings of the field-test on the IASB ED Classification and Measurement: Limited Amendments to IFRS 9 is now available from the EFRAG website.
The FRC comment letter to the IASB ED Classification and Measurement: Limited Amendments to IFRS 9 can be downloaded here.
May 2013, FRC invites comments on its draft response to IASB ED
Financial Instruments: Expected Credit Losses, (comments by 14 June 2013)
On 7 March 2013, the IASB published an Exposure Draft (the ED), Financial Instruments: Expected Credit Losses, proposing to eliminate the existing requirement to recognise an impairment loss on a financial asset only after a credit loss event has occurred. Instead, the ED would require expected credit losses to be recognised and updated on the basis of the probability of default. The ED would generally require an entity to establish an impairment allowance for all the financial instruments that are subject to the proposals from their initial recognition. The ED proposes that an entity should recognise:
a 12-month expected credit loss for financial instruments that have not deteriorated significantly in credit quality since initial recognition;
lifetime expected credit losses for financial instruments that have deteriorated significantly in credit quality since initial recognition but for which there is no objective evidence of impairment; and
lifetime expected credit losses for financial instruments for which there is objective evidence of impairment at the reporting date. For these assets interest revenue will be calculated on the net carrying amount.
The FRC’s draft comment letter sets out its preliminary assessment of the IASB’s ED and can be found here. The FRC believes that, given IASB’s extensive research and work in this area over recent years, the ED proposals strike a reasonable balance between cost of implementation and underlying economics and are likely to meet users’ need for companies to provide expected credit losses.  We therefore recommend that IASB aim to finalise the impairment phase of its project on financial instrument accounting as soon as possible.

Constituents are invited to send comments on any aspect of the FRC Draft Comment Letter no later than 14 June 2013. Comments should be sent to Seema Jamil-O’Neill at s.jamiloneill@frc.org.uk.
 
Field-test Expected Credit Losses, April 2013
EFRAG and the National Standard Setters ANC, ASCG, FRC and OIC invite companies to participate in a field-test on how the proposed impairment requirements will affect the assessment of the amount, timing and uncertainty of future cash flows of financial assets that are measured at amortised cost and FV-OCI, including trade receivables and lease receivables.

On 7 March 2013, the IASB issued the Exposure Draft (ED) Financial Instruments: Expected Credit Losses. Following the proposed impairment requirements, entities will be required to recognise, measure and disclose expected credit losses in their portfolios of financial assets that are measured at amortised cost and FV-OCI, certain loan commitments and financial guarantee contracts, as well as trade receivables and lease receivables. This field-test is carried out by EFRAG with the National Standard Setters ANC, ASCG, FRC and the OIC. Additionally, the following European associations have agreed to encourage their members to participate: EBF, ESBG, EACB, Leaseurope and BusinessEurope.
What is the objective of the field-test?
The purpose of the exercise is to identify whether or not the proposals for the expected credit losses model address the weaknesses of the existing incurred loss impairment model in IAS 39. Additionally, the exercise addresses the operationality and the impact and costs related to the expected credit losses model. In particular, the field-test asks questions on:

(a)   How the expected credit losses model reflects the amount, timing and uncertainty of future cash flows;
(b)   Whether the requirements are clear and operational;
(c)   The impact of the proposed expected credit losses model; and
(d)   The costs and benefits of the proposed expected credit losses model.
When and how will the field-test be conducted?
The field test will start on 15 April 2013 and completed questionnaires should be returned by 2 June 2013.

EFRAG and National Standard Setters have developed a questionnaire which participants are asked to complete. The questionnaire seeks evidence regarding the proposal set out in the ED, particularly the potential impact of the proposals , including the costs associated with that application.

In addition European workshops will be held for participants by industry, in which IASB staff will participate. These will be held during May and June 2013. Participation to the workshops will be limited to the respondents of the questionnaire. The workshops will be based on written case studies provided by respondents.

The information provided during the field-test to EFRAG and the National Standard Setters will remain confidential. Information used in any reports will be presented in such a way that no individual company or person can be identified. However, the list of participants in the field-test will be made public, unless participants explicitly request anonymity. The output of the field-test will be shared between EFRAG, the National Standard Setters, the European Commission and the IASB.

EFRAG and the National Standard Setters are coordinating their outreach with the IASB staff in order to avoid overlap in their respective activities.
Would you like to participate?
EFRAG and National Standard Setters encourage all entities that believe they are significantly impacted by the proposals to participate in the field-test. The proposed requirements will affect both financial and non-financial entities.

If you would like to participate in the field-test please contact Seema Jamil-O’Neill at s.jamiloneill@frc.org.uk. Upon receipt of your request for participation you will receive a copy of the questionnaire.
 
Field-test Classification and Measurement, February 2013
EFRAG and the National Standard Setters ANC, ASCG, FRC and OIC invite companies to participate in a field-test on how the transition from IAS 39 to the new IFRS 9 requirements will affect classification and measurement of financial assets.

In November 2012, the IASB issued the Exposure Draft (ED) Classification and Measurement: Limited Amendments to IFRS 9 to propose changes in the classification and measurement requirements in IFRS 9 Financial Instruments. As a consequence of the transition from IAS 39 to the new classification and measurement requirements in IFRS 9, as modified by the ED, entities might need to measure at fair value some financial assets that are currently measured at amortised cost, or the other way around. EFRAG and National Standard Setters are performing a joint field-test on how the new requirements would affect the current classification and measurement of financial assets. This field-test is carried out by EFRAG with the National Standard Setters ANC, ASCG, FRC and the OIC. Additionally, the following organisations have agreed to encourage their members to participate: EACB, EBF, ESBG, Insurance Europe and ISDA.
What is the objective of the field-test?
This field-test is meant to identify in what circumstances in practice the application of the new requirements in IFRS 9, as modified by the ED, would lead to changes in the current classification and measurement of financial assets under IAS 39; and to gather information on the characteristics of the financial assets involved, their relative significance and the high level reasons for those changes.
When and how will the field-test be conducted?
The field-test started on 26 February 2013 and completed questionnaires should be returned by 5 April 2013.

EFRAG and the National Standard Setters have developed a questionnaire which participants are requested to complete. The questionnaire asks participants to identify those financial assets for which the measurement basis would change as a result of the transition to IFRS 9, as modified by the ED. Additionally, follow-up interviews are expected to be conducted by EFRAG and National Standard Setters.

The information provided during the field-test to EFRAG and the National Standard Setters will remain confidential. Information used in any reports will be presented in such a way that no individual company or person can be identified. However, the list of participants in the field-test will be made public, unless participants explicitly request anonymity. The output of the field-test will be shared between EFRAG, the National Standard Setters, the European Commission and the IASB.
Would you like to participate?
EFRAG and the National Standard Setters encourage all entities that believe they are significantly impacted by the proposals to participate in the field-test. In particular, banks, insurers and other financial institutions are expected to participate as they are most likely to be involved with large amounts of financial assets. If you would like to participate in the field-test, please contact Seema Jamil-O'Neill at s.jamiloneill@frc.org.uk.
 
FRC Constituent Roundtable (2013)
The FRC held a breakfast meeting at the FRC on the 25 February 2013. At the roundtable we discussed UK views on:
the IASB's recent ED on IFRS 9 Classification and Measurement, and
the IASB's proposed impairment model (due to be issued during Q1 2013).
The following documents relate to that roundtable:

 Slides - Classification Measurement
 Slides - Impairment
 Notes
 
ASB responses to the IASB (2010)
A list of responses to IASB publications is set out below:

 ASB responds to FASB ED: Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities (September 2010)

 ASB responds to IASB ED 'Fair Value Option for Financial Liabilities' (June 2010)

 ASB responds to IASB ED 'Financial Instruments: Amortised Cost and Impairment' (June 2010)

 ASB responds to IASB ED ‘Derecognition’ (April 2010) 
 
ASB Constituent Roundtable (2010)
The ASB held a roundtable of its constituents on 6 May 2010 to discuss the proposals in the IASB's ED 'Financial Instruments: Amortised Cost and Impairment'. The following documents relate to that roundtable:

 Background paper
 Note of meeting
Slides
 
Monitoring IASB’s replacement of IAS 39 project (2008–2009)
As part of its efforts to influence the development of financial reporting standards on financial instruments, Accounting and Reporting Policy responds to IASB consultation documents to highlight UK constituents' concerns with the direction or detailed aspects of the IASB’s proposals. A list of responses to IASB publications is set out below:


IASB project to replace IAS 39

Accounting and Reporting Policy is actively monitoring the IASB project to replace IAS 39 with a view to influencing the final outcome. The IASB project consists of the following phases:
Classification and Measurement
Financial Liabilities
Impairment
Hedging
Derecognition
In November 2009, the IASB issued IFRS 9 ‘Financial Instruments’ containing new requirements for classification and measurement of financial assets. The effective date is 1 January 2013 with early application permitted. However, the Standard has not yet been endorsed by the European Union.

The IASB also published an Exposure Draft (ED) Financial Instruments: Amortised Cost and Impairment in November 2009. The ED proposes an expected loss model for impairment to replace the current incurred loss approach. The comment period for the ED closes on 30 June 2010.

Separately, the IASB issued an ED in March 2009 on Derecognition proposing amendments to the requirements in IAS 39 and IFRS 7. Respondents to the ED did not support the proposals in the ED. Therefore, the IASB is currently developing the ‘alternative approach’ proposed in the ED. A final standard on derecognition is expected to be issued in the second half of 2010.


 ASB responds to IASB ED ‘Classification of Rights Issues’ (September 2009) 

 ASB responds to IASB Request for Information ‘Impairment of Financial Assets: Expected Cash Flow Approach (September 2009) 

 ASB responds to IASB ED ‘Financial Instruments: Classification and Measurement’ (September 2009) 

 ASB response to IASB Discussion Paper 'Reducing Complexity in Reporting Financial Instruments' (September 2008)

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