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

IFRS 9 - Classification & Measurement (Financial Assets) (1)

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IFRS 9 - Classification & Measurement (Financial Assets) (2)

Prem Kumar, ACA IFRS 9 - Classification & Measurement (Financial Assets) (3)

Prem Kumar, ACA

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Published Mar 15, 2023

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

FAQs

IFRS 9 - Classification & Measurement (Financial Assets)? ›

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.

How are financial assets initially measured under IFRS 9? ›

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.

Which of the following are classifications of financial assets is permitted under IFRS 9? ›

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').

What is classification of assets in IFRS? ›

The classification of a financial asset is made at the time it is initially recognised, namely when the entity becomes a party to the contractual provisions of the instrument. [IFRS 9, paragraph 4.1. 1] If certain conditions are met, the classification of an asset may subsequently need to be reclassified.

What are the measurement categories of financial assets? ›

According to IFRS 9, financial assets are divided into five different measurement categories: amortised cost (AC), fair value through profit or loss (FVPL) and fair value through other comprehensive income with recycling (FVOCI) as well as without recycling (FVOCI Equity).

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.

How to classify financial assets? ›

Classification & Measurement - IFRS 9 - Financial Assets

IFRS 9 classifies financial assets into three categories: amortized cost, fair value through other comprehensive income (FVOCI), and fair value through profit or loss (FVTPL). Each category has different accounting treatment.

Which should be classified as financial asset? ›

A financial asset is a liquid asset that gets its value from a contractual right or ownership claim. Cash, stocks, bonds, mutual funds, and bank deposits are all are examples of financial assets.

What is the IFRS criteria for asset? ›

An entity should recognise an asset or liability if doing so provides: • relevant information; • a faithful representation; and • benefits that exceed costs. have a high level of measurement uncertainty.

What is the difference between IAS 39 and IFRS 9 classification? ›

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.

How are assets measured under IFRS? ›

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.

What is IFRS 9 for dummies? ›

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.

What is the measurement basis for financial assets? ›

The equivalent measurement basis for assets is value in use. The value in use of an asset is the present value of the cash flows estimated to arise from the continuing use of the asset and from its disposal at the end of its useful life.

What are the measurements of assets? ›

Two common measurement bases are historical cost and fair value: for assets, historical cost is the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire the asset at the time of its acquisition.

What are the measurement bases for IFRS? ›

Financial assets are measured and reported either at fair value or amortized cost. IFRS defines fair value as the amount at which an asset could be exchanged or a liability settled in an arm's length transaction between knowledgeable and willing parties.

What is the initial measurement of a financial asset? ›

A financial asset or financial liability is measured initially at fair value. Subsequent measurement depends on the category of financial instrument. Some categories are measured at amortised cost, and some at fair value.

What is the measurement method of IFRS 9? ›

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.

How is the initial measurement of a financial liability determined? ›

When a financial asset or financial liability is recognised initially, an entity shall measure it at the transaction price (including transaction costs except in the initial measurement of financial assets and liabilities that are subsequently measured at fair value through profit or loss) unless the arrangement ...

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