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IFRS 9 introduces a new model for the recognition of impairment losses – the expected credit losses (ECL) model. The ECL model constitutes a change from the guidance in IAS 39 and seeks to address the criticisms of the incurred loss model which arose during. the economic crisis.
In this article, we will compare the attributes of IAS 39 and IFRS 9 to understand the differences between the two standards. Scope. IAS 39 primarily focused on the classification and measurement of financial instruments, as well as hedge accounting and impairment.
The IASB developed IFRS 9 in three phases, dealing separately with the classification and measurement of financial assets, impairment and hedging. Other aspects of IAS 39, such as scope, recognition, and derecognition of financial assets, have survived with only a few modifications.
In November 2009 the IASB issued IFRS 9 (2009), the first milestone in the project to replace IAS 39. This standard required the classification and measurement of financial assets into only two categories: amortised cost, and fair value through profit or loss (‘FVPL’).
IFRS 9 'Financial Instruments' issued on 24 July 2014 is the IASB's replacement of IAS 39 'Financial Instruments: Recognition and Measurement'. The Standard includes requirements for recognition and measurement, impairment, derecognition and general hedge accounting.
IFRS 9 bases the classification of financial assets on the contractual cash flow characteristics and the entity’s business model for managing the financial asset, whereas IAS 39 bases the classification on specific definitions for each category.
The purpose of this publication is to provide a high-level overview of the IFRS 9 requirements, focusing on the areas which are different from IAS 39. The following areas are considered: • classification and measurement of financial assets; • impairment; • classification and measurement of financial liabilities; and • hedge accounting.
