IFRS 9 – Reclassification of financial instruments

The IFRS 9 requirements for reclassification of financial instruments are significantly different from those in IAS 39.

IAS 39

IFRS 9

  • IAS 39 contains numerous reclassification rules for the various categories of financial instruments.
  • For instance, a change in intention or ability causes the initial classification to be inappropriate, a reliable measure of fair value becomes available or is no longer available, etc.

(IAS 39.50-54)

IFRS 9 – Reclassification of financial instruments

  • There is only one principle for reclassification of financial assets. Reclassification of financial assets is required only when an entity changes its business model for managing them.
  • No reclassification of financial liabilities is allowed.

(IFRS 9.4.4.1-2)

IFRS 9 – Reclassification of financial instruments

IFRS 9 – Reclassification of financial instruments

Changes in an entity’s business model that will result in a reclassification of financial assets are expected to be very infrequent, for example, when the entity has acquired, disposed of or terminated a business line.

The following examples from IFRS 9, which do not represent a change in the business model, reiterate how rare reclassifications will be: IFRS 9 – Reclassification of financial instruments

  • A change in intention related to particular financial assets (even in circumstances of significant changes in market conditions).
  • The temporary disappearance of a particular market for financial assets. IFRS 9 – Reclassification of financial instruments
  • A transfer of financial assets between parts of the entity with different business models. (IFRS 9.B4.4.3)

Note! Financial assets are only reclassified when there are changes in the business model for managing the assets. A change in the entity’s business model is a significant event and, thus, is expected to be uncommon. Financial liabilities cannot be reclassified under IFRS 9. Overall, this simplifies the reclassification of financial instruments under IFRS 9 compared to IAS 39.

IFRS 9 – Reclassification of financial instruments

Changes in an entity’s business model that will result in a reclassification of financial assets are expected to be very infrequent, for example, when the entity has acquired, disposed of or terminated a business line.

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