In November 2012, the IASB issued the Exposure Draft 'Classification and Measurement: Limited Amendments to IFRS 9' (the ED) to clarify and propose limited changes to the requirements for classifying and measuring financial instruments issued by the IASB in October 2010.
EFRAG and the National Standard-Setters from France, Germany, Italy and the UK (ANC, ASCG, OIC and FRC respectively) have conducted a joint field test by asking preparers to apply the new requirements in IFRS 9 (as modified by the ED) to their financial assets (by types of financial assets, portfolios or products).
The exercise was focused on the practical application of the new requirements and was intended to gather solely facts and objective data, by way of a questionnaire, rather than views and opinions.
Subject to the limitations and constraints set forth in the report, the findings of the field test indicated the following:
a) More financial assets would be measured at FV-PL under IFRS 9 because they fail the contractual cash flow characteristics assessment: These instruments are currently measured at amortised cost or classified in the available-for-sale (AFS) category as identified by many participants in the banking and insurance industries.
b) Bifurcation of financial assets is currently used only to a limited extent: Less than half of the participants indicated using bifurcation; however, the majority of them reported an insignificant use. Several participants from the banking industry reported that they currently use the fair value option instead of bifurcation.
c) Investment strategies and/or the level at which the business model test is performed could change when implementing IFRS 9 to achieve a particular accounting measurement: Although participants were asked to consider the business model in place as at the date of reference, many participants from the banking and insurance industries indicated that the classification of financial assets held in liquidity portfolios and those backing insurance contracts would depend on the final requirements in IFRS 9 and the outcome of the project on insurance contracts.
Press release
Field Test - Final Report
© EFRAG - European Financial Reporting Advisory Group
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article