Follow Us

Follow us on Twitter  Follow us on LinkedIn
 
Home>Aladdin's Cave - Archives>Financial Instruments: IASB/FASB convergence
Print Page Save to My Library <Next Article  Previous Article>
30 October 2010

IASB: additions to IFRS 9 for financial liability accounting


Default: Change to:


The IASB issued requirements on the accounting for financial liabilities. These requirements will be added to IFRS 9 Financial Instruments and complete the classification and measurement phase of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement.


The new requirements address the problem of volatility in profit or loss (P&L) arising from an issuer choosing to measure its own debt at fair value. This is often referred to as the ‘own credit’ problem.

In response to feedback received during its consultation process, the IASB decided to maintain the existing amortised cost measurement for most liabilities, limiting change to that required to address the own credit problem. With the new requirements, an entity choosing to measure a liability at fair value will present the portion of the change in its fair value due to changes in the entity’s own credit risk in the other comprehensive income (OCI) section of the income statement, rather than within P&L.

Commenting on the amendments, Sir David Tweedie, Chairman of the IASB, said: “The new additions to IFRS 9 address the counter-intuitive way a company in severe financial trouble can book a large profit based on its theoretical ability to buy back its own debt at a reduced cost.”

IFRS 9 applies to financial statements for annual periods beginning on or after 1 January 2013. Entities are permitted to apply the new requirements in earlier periods, however, if they do, they must also apply the requirements in IFRS 9 that relate to financial assets.
The second and third phases of IFRS 9 are concerned with accounting for the impairment of financial assets and hedge accounting. The IASB is aiming to complete those phases by 30 June 2011, by adding the impairment and hedge accounting requirements to IFRS 9 and, therefore, replacing IAS 39 in its entirety.

Press release


© IASB - International Accounting Standards Board

< Next Previous >
Key
 Hover over the blue highlighted text to view the acronym meaning
Hover over these icons for more information


Add new comment





 


www.grahambishop.com
// Business Applications by Denaploy 		Web Master Information
Terms & Conditions
Privacy Policy