IFRS 9 Modified financial assets

IFRS 9 Modified financial assets

If the contractual cash flows on a financial asset are renegotiated or modified, the holder needs to assess whether the financial asset should be derecognised. While IAS 39 contains guidance on when financial liabilities that have been renegotiated or modified should be derecognised, it does not do so for financial assets.

Similarly, as the derecognition literature in IAS 39 has been carried forward to IFRS 9, the IASB has still not established criteria for analysing when a modification of a financial asset constitutes a derecognition event. However, an entity may refer to the decision made by the IFRS Interpretations Committee in May 2012.

The Interpretations Committee was asked to consider the accounting treatment of Greek government bonds (GGBs). The principal issue raised was whether the portion of the old GGBs to be exchanged for new bonds with different maturities and interest rates should result in derecognition of the whole asset, or only part of it, in accordance with IAS 39 or, conversely, be accounted for as a modification that would not require derecognition. IFRS 9 Modified financial assets

The IFRS Interpretations Committee concluded that this assessment can be made, either on the basis of: IFRFXXS 9 Modified financial assets

  • The extinguishment of the contractual rights to the cash flows from the assets (IFRS 9 3.2.3)
    Or IFRS 9 Modified financial assets IFRS 9 Modified financial assets
  • By analogising to the notion of a substantial change of the terms of financial liabilities to these assets (IFRS 9 3.3.2)

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