Classification and Measurement: Limited Amendments to IFRS 9

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CLASSIFICATION AND MEASUREMENT: LIMITED AMENDMENTS TO IFRS 9 (PROPOSED AMENDMENTS TO IFRS 9 (2010)) [Draft] Amendments to International Financial Reporting Standard 9 Financial Instruments (2010) [Please note: footnotes are included as context to the proposals and will not be included in the final text.] Paragraphs 4.1.1 and 4.1.3–4.1.4 are amended. Paragraph 4.1.2A is added. New text is underlined and deleted text is struck through. Paragraph 4.1.2 is shown for reference only and is not proposed for amendment. 4.1 Classification of financial assets 4.1.1 Unless paragraph 4.1.5 applies, an entity shall classify financial assets as subsequently measured at either amortised cost, fair value through other comprehensive income or fair value through profit or loss on the basis of both: (a) the entity’s business model for managing the financial assets and (b) the contractual cash flow characteristics of the financial asset. 4.1.2 A financial asset shall be measured at amortised cost if both of the following conditions are met: (a) The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows. (b) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Paragraphs B4.1.1–B4.1.26 provide guidance on how to apply these conditions. 4.1.2A A financial asset shall be measured at fair value through other comprehensive income if both of the following conditions are met: (a) The asset is held in a business model in which assets are managed both in order to collect contractual cash flows and for sale. (b) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Paragraphs B4.1.1–B4.1.26 provide guidance on how to apply these conditions. 4.1.3 For the purpose of applying paragraphs 4.1.2(b) and 4.1.2A(b), interest is consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time. 9 � IFRS Foundation
EXPOSURE DRAFT–NOVEMBER 2012 4.1.4 A financial asset shall be measured at fair value through profit or loss unless it is measured at amortised cost in accordance with paragraph 4.1.2 or at fair value through other comprehensive income in accordance with paragraph 4.1.2A. However an entity may make an irrevocable election for particular financial assets in this measurement category to present in other comprehensive income subsequent changes in fair value (refer to paragraph 5.7.5). Paragraphs 5.2.1–5.2.2 are amended. New text is underlined and deleted text is struck through. 5.2 Subsequent measurement of financial assets 5.2.1 After initial recognition, an entity shall measure a financial asset in accordance with paragraphs 4.1.1–4.1.5 at fair value or: (a) amortised cost (see paragraphs 9 and AG5–AG8 of IAS 39 4 ); (b) fair value through other comprehensive income (refer to paragraph 5.7.1A); or (c) fair value through profit or loss. 5.2.2 An entity shall apply the impairment requirements in paragraphs X-X 5 58–65 and AG84–AG93 of IAS 39 to financial assets measured at amortised cost in accordance with paragraph 4.1.2 and financial assets measured at fair value through other comprehensive income in accordance with paragraph 4.1.2A. Paragraphs 5.6.2–5.6.3 are amended. New text is underlined and deleted text is struck through. Paragraph 5.6.1 is included for reference only and is not proposed for amendment. 5.6 Reclassification of financial assets 5.6.1 If an entity reclassifies financial assets in accordance with paragraph 4.4.1, it shall apply the reclassification prospectively from the reclassification date. The entity shall not restate any previously recognised gains, losses or interest. 5.6.2 If, in accordance with paragraph 4.4.1, an entity reclassifies a financial asset out of the amortised cost measurement category and so that it is 4 References to the requirements in IAS 39 will be replaced by references to the relevant paragraphs in this Standard when this Standard is completed. 5 The references in this paragraph will be inserted when the IASB finalises the expected loss impairment model and incorporates those requirements in this Standard. The IASB has tentatively decided that the same impairment model will be applied to both financial assets in the amortised cost measurement category and the fair value through other comprehensive income measurement category. � IFRS Foundation 10
Page 1 and 2: November 2012 Exposure Draft ED/201
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credit risk. However, given the con
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BC111 Lastly, the IASB noted that I
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Bifurcation of embedded features in
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The business model EXPOSURE DRAFT-N
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Classification and Measurement: Limited Amendments to IFRS 9

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