IFRS 9 Financial Instruments Measurement

IFRS 9 uses the following criteria for determining the classification as of financial assets at Amortized Cost, FVOCI or FVPL categories apply:

The critical issues for classifying and measuring financial assets are whether:

Both of these tests have to be met in order to account for an instrument at Amortized Cost or … Read more

Curing of a credit-impaired financial asset

See credit-impaired financial asset for some introduction to this illustrative example.

The case

An existing loan with an effective interest rate of 10% has become credit-impaired. Lifetime expected credit losses have been recognised on the loan as of 1 January Year 20×1.

The expected shortfall in cash flows is shown in Table 1 and remain unchanged until 31 December N+3. Discounted at the effective interest rate (EIR) this gives an expected credit loss (ECL) as at 1 January of CU59,000, as shown in Table 1.

Table 1: Contractual & expected cash flows

Cash flows as at 31 Dec

in CU ‘000






Contractual cash flows






Expected cash

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Setting the scene: the Expected Credit Losses model

Start here to get a good understanding of  Expected Credit Losses or continue, you decide…… The model should be applied to:Setting the scene: the Expected Credit Losses model

The IFRS 9 impairment model … Read more

Summary impairment of financial assets

The impairment requirements are applied to:

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Property development (intercompany) finance

Interest bearing term loan – Senior interest-bearing bank term debt


Parent C operates in the UK real estate sector and purchases land for development into residential units for public sale. Each potential development proposal is supported by a detailed business case which includes a due diligence report in respect of the expected Gross Development Costs (GDC) as well as an independent third party valuation of the Gross Development Value (GDV) of the completed site both of which are undertaken in order to secure bank financing. Management assesses each proposal in accordance with a number of key investment criteria, including for example, the minimum yield required on each development.

Once the proposal has been approved by Management, a new … Read more

Equity investments at FVOCI

IFRS 9 requires all equity investments to be measured at fair value. The default approach is for all changes in fair value to be recognised in profit or loss.

However, for equity investments that are neither held for trading nor contingent consideration recognised by an acquirer in a business combination, entities can make an irrevocable election at initial recognition to classify the instruments as at FVOCI, with all subsequent changes in fair value being recognised in other comprehensive income (OCI). This election is available for each separate investment.

Under this new FVOCI category, fair value changes are recognised in OCI while dividends are recognised in profit or loss (unless they clearly represent a recovery of Read more