In August 2011, the Board published the exposure draft Mandatory Effective Date of IFRS 9 (ED), which reflected the following tentative decisions: the mandatory effective date of IFRS 9 Financial Instruments should be changed to annual periods beginning on or after 1 January 2015; early application should continue to be permitted; and comparative financial statements on the classification and measurement of financial instruments should be required for entities that initially apply IFRS 9 for annual periods beginning on or after 1 January 2012 (preceding a change in the mandatory effective date).

At the November supplemental Board meeting, the Board considered feedback received on the ED in relation to the mandatory effective date of IFRS 9 and the requirement to restate comparative financial statements, and tentatively decided:

• An entity shall apply IFRS 9(2009) and IFRS 9(2010) for annual periods beginning on or after 1 January 2015; an amendment from the current effective date of annual periods beginning on or after 1 January 2013. Early application would be permitted.
• Instead of requiring restatement of comparative financial statements for IFRS 9, an entity should provide a reconciliation at the date of transition between the financial statement line items and the measurement category under IAS 39 Financial Instruments: Recognition and Measurement and IFRS 9, including the classes of financial instruments where normally required in IFRS 7 Financial Instruments: Disclosures (as amended by IFRS 9). An entity would also apply the reclassification disclosures required in IFRS 7 (as amended by IFRS 9) at the date of transition.

Mandatory effective date of IFRS 9

The staff presented constituent feedback received on the October 2010 Request for Views on Effective Dates and Transition Methods (RV) as well as the August 2011 ED in relation to the mandatory effective date of IFRS 9. While deferral of the mandatory effective date of IFRS 9 was almost universally supported across both requests for feedback, many qualifications were provided, including:

• deferral of the mandatory effective date so as to allow concurrent transition of all phases of the IFRS 9 project to replace IAS 39 given that the impairment, hedging and offsetting phases of the project to replace IAS 39 are not yet complete.
• deferral of the mandatory effective date so as to allow for concurrent application of other financial instrument-related projects, including the insurance contracts project.
• deferral of the mandatory effective date so as to allow the concurrent application of other major projects, including that of revenue recognition, leases, insurance contracts and other financial instrument related projects.

However, many respondents noted practical concerns with extending the mandatory effective date in accordance with other projects. Concerns included:

• that a further delay in the effective date would result in additional comparability issues between those who have elected early application of IFRS 9 and those who have not, given reduced predictability of market participants using the standard.
• the European Union's intention to delay endorsement of IFRS 9 until all phases of the project to replace IAS 39 are complete would cause implementation issues for those applying IFRSs in Europe who would prefer to early adopt IFRS 9.

Based on this feedback, the staff recommended that the mandatory effective date of IFRS 9 should be "applied for annual periods beginning on or after 1 January 2015, subject to further review". The qualification in timing is based on the uncertain timing of completion of other financial instrument project phases including impairment, hedge accounting and offsetting of financial assets and liabilities, as well as the insurance contracts project.

In considering this feedback, all Board members agreed that a deferral of the effective date of IFRS 9 was warranted. However, Board members had different views regarding the date which should be included within the standard.

Multiple Board members expressed a desire to define a specific date, as opposed to including the comment 'subject to further review'. These Board members expressed concern that the open ended timing could be seen to represent a lack of commitment to complete remaining phases of the financial instrument project. Similarly, these Board members noted the absence of a clearly defined date would present difficulties for IFRS financial statement preparers, including those who will be first-time adopters of IFRSs, in managing their resources appropriately for the implementation of new standards.

However, other Board members were concerned with expressing a definitive date given the uncertainty in completing remaining phases of the financial instruments project. These Board members did not want the effective date to be 'a moving target', and thus, the 'subject to further review' comment was seen as a viable proposal to highlight that the effective date is ultimately contingent on completion of other projects. Further, these Board members were concerned that a definitive date may be perceived as representing an intention to bypass quality in the interest of meeting targets. One Board member even proposed not including an effective date until other financial instrument project phases were completed.

With this feedback, the IASB Chair suggested that a definitive effective date of annual periods beginning on or after 1 January 2015 be provided. He noted that it is understood that any Board decisions, including that of an effective date, are subject to further consideration by the Board given market developments, constituent feedback, Board activities and other relevant factors. Thus, the inclusion of the phrase 'subject to further review' was deemed superfluous. All but 1 Board member supported the proposal to state a definitive effective date of annual periods beginning on or after 1 January 2015. The Board did not discuss which active projects (e.g., insurance contracts, leasing, revenue recognition and other financial instruments projects) would influence the effective date of IFRS 9 or what events would trigger a re-review of the IFRS 9 effective date.

Comparative restatement

The IASB staff presented constituent feedback received on the RV and ED regarding comparative financial statement presentation at transition to IFRS 9. There was no consensus between constituents as to whether comparative financial statements should be required to be restated upon the initial application of IFRS 9; however, common themes were noted.

Those supporting the restatement of comparative financial statements noted that presentation of comparative financial statements is consistent with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors; a delay in the mandatory effective date of IFRS 9 would allow a sufficient timeframe for entities to prepare comparatives; and IAS 39 and IFRS 9 are sufficiently different to each other that restatement will be necessary to provide meaningful information to users of financial statements.

Those opposed to restatement of comparative financial statements noted that time pressures similar to those existing when IFRS 9(2009) and IFRS 9(2010) were initially issued will nonetheless exist when the last phase of the project to replace IAS 39 is issued.

Further, many respondents noted that while full retrospective application renders the most useful information, inevitable exceptions to full retrospective application (such as those granted for IAS 32 Financial Instruments: Presentation and IAS 39 upon first-time adoption of IFRSs for European reporting entities, or the fact that classification and measurement requires retrospective application, whereas hedge accounting requires prospective application) impair the comparability and therefore reduce the usefulness of comparative information.

Considering this feedback, and other potential implementation issues relating to presentation of comparative financial statements (e.g., assets derecognised at date of initial application, business model determination, designation of an asset or liability under the fair value option or the presentation of changes in fair value of a non-trading equity investment in other comprehensive income), the staff outlined a recommendation to require additional disclosures to enable users to understand the impact of transitioning from IAS 39 to IFRS 9 in lieu of a requirement to restate comparative financial statements.

The IASB staff provided the following illustration of a comparative transition disclosure in reconciling statement of financial position balances from IAS 39 to IFRS 9 at 1 January 2015 (assumes the entity's date of initial application is 1 January 2015):

One Board member expressed concern that the staff's recommendation was 'changing the game' for those who have or are currently implementing IFRS 9 through early application. Specifically, his concern was that the revised disclosure requirements would result in incremental burden to preparers by requiring additional disclosures not previously required. However, another Board member noted that much of the information required in the disclosure is already required by IAS 8 and IFRS 7, and thus, preparers should be equipped to handle such disclosures without undue incremental burden.

Another Board member requested disclosure of comparative net interest margin which was not currently provided in the staff's proposed comparative transition disclosure. However, the staff communicated that such a disclosure is embedded in IAS 8, as entities are required to provide an analysis of changes by financial statement line item (including that of net interest margin) if it is practicable to do so. Further, the staff noted that to attribute changes in net interest margin to applying IFRS 9 for the first time would be to ignore the effects of other factors at play, such as interest and credit changes. In the staff's view, it could be difficult to isolate the effects due to reclassification. Therefore, no additional disclosure was recommended by the staff in relation to IFRS 9 application specifically.

In light of the above, the Board tentatively agreed with the staff recommendation (with the exception of one Board member who preferred required restatement of comparatives). Instead of requiring restatement of comparative financial statements for IFRS 9, an entity would provide a reconciliation at the date of transition between the financial statement line items and the measurement category under IAS 39 and IFRS 9, including the classes of financial instruments where normally required in IFRS 7 (as amended by IFRS 9). An entity would also apply the reclassification disclosures required in IFRS 7 (as amended by IFRS 9) at the date of transition. Disclosure would be required even if an entity chooses to restate its comparatives for the effects of applying IFRS 9.