Contractual Cash Flow Characteristics of Financial Assets (Possible Amendments to IFRS 9) [Research]

Next steps:

At its meet­ing on May 23-27, 2022, the IASB approved this pro­ject and intends to issue an Exposure Draft in this regard to amend IFRS 9 (no date specified)

Last updated:

July 2022

Overview

IFRS 9, Financial Instruments requires an entity to classify financial assets as subsequently measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss on the basis of both:

  1. the entity’s business model for managing the financial assets; and
  2. the contractual cash flow characteristics of the financial asset.

A financial asset is required to be measured at fair value through profit or loss if its cash flows are not solely payments of principal and interest on the principal amount outstanding. Paragraphs B4.1.7 to B4.1.26 of IFRS 9 set out requirements for making this assessment.

In September 2021, the IASB issued Request for Information Post-implementation Review of IFRS 9—Classification and Measurement.

Feedback indicated that, in general, the requirements in IFRS 9 relating to assessing the contractual cash flows of financial assets work as intended. However, aspects of the requirements could be clarified to support consistent application, for example in the case of financial assets with ESG-linked features and contractually linked instruments.

At its meeting on May 23-27, the IASB decided to add a standard-setting project to its agenda to make narrow scope amendments to clarify the requirements for assessing a financial asset’s contractual cash flow characteristics.

Other developments

May 2022

At its meeting on May 23-27, the IASB decided to add a standard-setting project to its agenda to make narrow scope amendments to clarify the requirements for assessing a financial asset’s contractual cash flow characteristics.

 

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