IFRS 9 - Classification & Measurement (Financial Assets) (2024)

FAQs

What is the classification and measurement of financial assets under IFRS 9? ›

IFRS 9 divides all financial assets that are currently in the scope of IAS 39 into two classifications - those measured at amortised cost and those measured at fair value.

Under IFRS 9, a financial asset is initially measured at fair value plus transaction costs, unless it is carried at fair value through profit or loss, in which case transaction costs are immediately expensed.

Categories of financial assets under IFRS 9

Amortised cost. Fair value through other comprehensive income with recycling to P/L ('FVOCI with recycling'). Fair value through other comprehensive income without recycling to P/L ('FVOCI no recycling'). Fair value through profit or loss ('FVTPL').

IFRS 9 describes requirements for subsequent measurement and accounting treatment for each category of financial instruments. It presents the rules for derecognition of financial instruments, with focus on financial assets.

a contractual claim to something of value; modern economies have four main types of financial assets: bank deposits, stocks, bonds, and loans. In reality, there are many more types of financial assets (like derivatives, calls, puts, and so on), but you only need to know the basics of these four types for this course.

IFRS 9 allows the use of practical expedients when measuring ECLs under the simplified approach – e.g. using a provision matrix. A company that applies a provision matrix may be applying segmentation to capture the significantly different historical credit loss experience for different customer segments.

Measurement of financial assets

A financial asset is measured at fair value through profit or loss (FVTPL) unless it is measured at amortised cost or at fair value through other comprehensive income (FVTOCI).

(a) A financial asset is recognized when, and only when, it is probable that future economic benefits will flow to the entity and the cost or value of the instrument can be measured reliably.

Under the principles of IFRS 13, Fair Value Measurement the fair value of an asset is the price that would be received to sell the asset in an orderly transaction between market participants.

Which of the following should be classified as a financial asset? ›

Cash, stocks, bonds, mutual funds, and bank deposits are all are examples of financial assets. Unlike land, property, commodities, or other tangible physical assets, financial assets do not necessarily have inherent physical worth or even a physical form.

When we speak about assets in accounting, we're generally referring to six different categories: current assets, fixed assets, tangible assets, intangible assets, operating assets, and non-operating assets. Your assets can belong to multiple categories. For example, a building is an example of a fixed, tangible asset.

IFRS 9 divides all financial assets that are currently in the scope of IAS 39 into two classifications - those measured at amortised cost and those measured at fair value.

t 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.

Total Assets = Total Liabilities + Total Stockholder's Equity. Total Liabilities are debts that the company owes. The stockholder's equity is shares and stocks owned by the shareholders or owners of the company.

A financial asset is measured at fair value through profit or loss (FVTPL) unless it is measured at amortised cost or at fair value through other comprehensive income (FVTOCI).

IFRS 9 requires that all financial assets are subsequently measured at amortised cost, FVOCI or FVPL based on the business model for managing the financial assets and their contractual cash flow characteristics.

An entity shall measure the fair value of an asset or a liability using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.