IFRS 9 Financial Instruments

Overview of IFRS 9

IFRS 9 is effective for annual periods beginning on or after 1 January 2018 with early application permitted.

IFRS 9 specifies how an entity should classify and measure financial assets, financial liabilities, and some contracts to buy or sell non-financial items.

According to IFRS 9, an organisation must recognise a financial asset or liability in its statement of financial position when it becomes a party to the instrument’s contractual conditions. At the time of initial recognition, an entity values a financial asset or a financial liability at its fair value plus or minus, in the case of a financial asset or a financial liability that is not measured at fair value through profit or loss, transaction costs directly attributable to the financial asset’s or liability’s acquisition or issuance.

Financial assets

When an entity first recognises a financial asset, it classifies it based on the entity’s business model for managing the asset and the asset’s contractual cash flow characteristics, as follows:

When, and only when, an entity changes its business model for managing financial assets it must reclassify all affected financial assets.

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