The IFRS (International Financial Reporting Standards) Foundation has announced it will publish amendments to IFRS 9 and IAS 28 on 12 October 2017. Specifically, the following documents will be updated and eIFRS Professional and eIFRS Comprehensive subscribers will be able to download the amended documents through the IFRS website:
- Prepayment Features with Negative Compensation (Amendments to IFRS 9);
- Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28); and
- Proposed IFRS Taxonomy Update — Prepayment Features with Negative Compensation(Amendments to IFRS 9).
IFRS 9 addresses the classification and measurement of financial instruments, impairment of financial assets and hedge accounting. IFRS 9 replaces IAS 39 and will come into force from January 2018. The standard introduces the following rules for non-financial corporates:
- introduction of fair value through other comprehensive income (FVTOCI), for debt instruments;
- FVTOCI replaces the available-for-sale (AFS) classification under IAS 39;
- IFRS 9 introduces a new expected loss impairment model which replaces IAS 39’s incurred loss model;
- the loan loss allowance is recognised on initial recognition and measured as either a 12-month expected loss allowance or a lifetime expected loss allowance;
- an earlier trigger for recognising impairment losses means entities will have to establish appropriate systems and processes for identifying when there has been a significant increase in credit risk; and
- corporates will have to use data not previously required under IAS 39, for example in the calculation of loss allowances measured on a probability-weighted basis.
IAS 28 – Investments in Associates addresses the accounting requirements for investments in associate entities. An associate entity is described as “an entity over which an investor has significant influence (such as power to participate in the financial and operating policy decisions) but not control or joint control”. Investments in associates are, with limited exceptions, required to be accounted for using the equity method. More information on the definition of 'associate' and applying the equity method of accounting can be found on the IASPlus website.
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