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Differences Between Ias 39 and Ias 9

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Salient differences between IAS 39 and IFRS 9 | Accounting For Investments

Accounting For Investments
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Salient differences between IAS 39 and IFRS 9 | Accounting For Investments

Salient differences between IAS 39 and IFRS 9 by R. Venkata Subramani
On 12 November 2009, the International Accounting Standards Board (IASB) issued IFRS 9 Financial
Instruments.
Salient differences between IAS 39 and IFRS 9
Parameter

IAS 39

IFRS 9

Name

Financial Instruments:
Recognition and Measurement

Financial Instruments

Applicability

Currently effective

Effective from 1st Jan 2013 with early adoption permitted

Scope

All aspects of Financial assets & Financial Liabilities including hedge accounting

Only Financial assets included. Presently the standard does not include Financial liabilities, derecognition of financial instruments, impairment and hedge accounting Classification of debt instruments

Fair Value Through Profit & Loss
(FVPL)

Fair Value Through Profit & Loss
(FVPL)

Available­for­sale (AFS)

Amortised Cost (AC)

Held­to­maturity (HTM)
Loan and Receivable (LAR)
Classification
of equity instruments Fair Value Through Profit
& Loss (FVPL)

Basis of classification Intention to hold till maturity, trading for short term profits, derivative, loan or receivable, or intentional designation subject to certain restrictions Available­for­sale (AFS)

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Fair Value Through
Profit & Loss (FVPL)

Fair Value Through Other
Comprehensive Income (FVOCI)
Classification based on business model and the contractual cash flow characteristics 2/5

5/6/2015

Measurement
– Debt Instruments

Salient differences between IAS 39 and IFRS 9 | Accounting For Investments

Measured at amortised cost if classified as held­to­maturity or as loan or receivable.

Other classifications are measured at fair value.

Measured at amortised cost (AC) if business model objective is to collect the contractual cash flows and the contractual cash flows represent solely payment of principal and interest on the principal amount outstanding.

Debt instruments meeting the above criteria can still be measured at fair value through profit or loss (FVPL) if such designation would eliminate or reduce accounting mismatch.
If not, measured at fair value through profit or loss (FVPL)

Measurement
– Equity
Instruments

Measured at fair value.

Embedded derivatives Embedded derivatives are separated from the hybrid contract and are measured at FVPL.

No bifurcation of asset.

Fair value option

An entity can designate a financial asset to be measured at fair value on initial recognition.

The entity has the freedom to do so and need not satisfy any other criteria

A financial asset can be designated as
FVPL on initial recognition only if that designation eliminates or significantly reduces an accounting mismatch had the financial asset been measured at amortised cost. Reclassification between the various four categories allowed under specific circumstances with the

If entity’s business model objective changes, reclassification is permitted between FVPL and AC or vice versa.

Reclassifications
– Debt instruments

Exception: Unquoted equity investments are measured at cost where fair valuation is not sufficiently reliable.

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Measured at fair value through profit or loss. An entity can irrevocably designate at initial recognition as fair value through other comprehensive income, provided the equity investment is not held for trading.

The financial asset is assessed in its entirety as to the contractual cash flows and if any of its cash flows do not represent either payments of principal or interest then the whole asset is measured at FVPL.

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Salient differences between IAS 39 and IFRS 9 | Accounting For Investments

gain/loss being treated differently depending upon the movement between the classifications.

Such changes should be demonstrable to external parties and are expected to be very infrequent.

Reclassification from held­to­ maturity (HTM) is viewed seriously if does not fall within the permitted exceptions. Reclassifications
– Equity instruments Reclassification is permitted between the FVPL and AFS.

When transferred from AFS to
FVPL, unrealized gain/loss is recognized in P&L based on fair value.
When transferred from FVPL to AFS, no reversal of gain/loss recognized as unrealized is permitted. However all gain/loss on disposal of AFS are recognized in P&L by transfer from equity.

Reclassification between FVPL and
FVOCI not permitted as FVOCI classification is done at the irrevocable designation of the entity as such. Only dividend income is recognized in P&L of assets designated as FVOCI.
Even on disposal of such assets, the gain/loss is not transferred from equity, but remains permanently in equity.

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