IASB Publishes Latest Volume on ‘Investor Perspectives’

Wednesday, January 2, 2013 Print Email

The IASB has issued yet another volume related to its series on ‘Investor Perspectives’ where Patrick Finnegan, International Accounting Standards Board member has discussed the proposals for amending the measurement and classification related requirements mentioned in the IFRS 9-Financial Instruments.

The volume discusses a number of topics such as:

- The International Accounting Standard Board’s logic behind replacing International Accounting Standard 39 Financial Instruments: Recognition and Measurement.

- The existing measurement and classification related requirements of IFRS 9.

- The primary reasons behind proposed changes to IFRS 9.

- Detailed information pertaining to the amendments that have been proposed to IFRS 9, which have been laid down in the Exposure Draft-Classification and Measurement: Limited Amendments to IFRS 9, in addition to the proposed FVOCI category.

It must be noted that in the month of November in 2012, the IASB had forwarded proposals for amending the classification and measurement related requirements in IFRS 9-Financial Instruments. The amendments that were proposed were narrow as far as its scope was concerned and were also in line with present principles listed in IFRS 9.

The proposed amendments introduced a 3rd category of measurement i.e. FVOCI (Fair Value through Other Comprehensive Income). This particular measurement related category has been designed as per the present classification related conditions in IFRS 9 and offer 2 sets that contain information. While one of them is the amortized cost in loss and profit, the other one is fair value in the balance sheet. Both the sets are important for assessing the timing, uncertainty and amounts of cash flows in future.

These proposal have been designed to alter the need for early IFRS 9 application, with an intention to enhance comparability within organizations, which are using IFRS 9, even before it comes into effect on a mandatory basis and at the same time also responds to the concerns regarding volatility, which occurs in loss or profit owing to alterations in an issuer’s own credit related risk, at the time of measuring non-derivative finance based liabilities that are measured as per fair value.

The ED also gave clarifications on application based queries, like the manner in which the frequency or amount of sales needs to be analyzed for determining if they are in line with measurement of a finance based asset at a cost that has been amortized or not and the manner in which specific contract related cash flows needs to be assessed. 

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