International Changes in IFRS 9

CA Maneet Pal
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http://www.capasricha.com/

The exposure draft of the anticipated amendments to IFRS 9 Financial Instruments published by the International Accounting Standards Board (IASB), recommend changing the mandatory effect date of the IFRS 9 (2009) and IFRS 9 (2010). On or after January 1^st 2015 the entities will be required to apply for the annual reports rather than January 1^st 2013.

IAS 39 Financial Instruments: - Recognition and Measurement

A project had been undertaken to replace the IAS39 to which IFRS 9 (2009) and IFRS 9 (2010) were issued.

• IFRS 9 (2009) addressed only Financial Assets
• IFRS 9 (2010) addressed both Financial Assets as well as Financial Liabilities

Although the 2010 amendment outdated the 2009 version but still 2009 continues to be in force. So entities that elect the IFRS 9 (2009) before its effective date need not apply IFRS 9 (2010) before its effective date.

Since IFRS 9 (2009) and IFRS 9 (2010) have been published the Board has received comments and proposals on it.  Request for Views on Effective Dates and Transition Methods published in October 2010 gather a lot of views and reviews in persuasion of the project to replace IAS 39.

In accordance to the above the Board has decided to invite comments on the exposure draft and the Basis for conclusions should be submitted in writing so as to be received by 21 October 2011. The comments are to be sent through electronic media to the IFRS website, www.ifrs.org .The response that the board receives before 21^st October 2011 will be put for public viewing unless discretion has been requested. 

Comments Invited

Comments are invited from the Board to facilitate the amendments proposed. A few things should be noted while you comment and pen down your reviews. Relevant paragraphs and notes should be highlighted, a lucid approach to the amendment is a must, and alternate suggestions should be included. Along with that it’ll be very much fine if the comments are made with the following couple of question in mind.

1)      The Board proposes to amend IFRS 9 (2009) and IFRS 9 (2010) so that entities would be required to apply them for annual periods beginning on or after 1 January 2015.  Do you agree?  Why or why not?  If not, what alternative do you propose?

2)      The Board proposes not to change the requirement in IFRS 9 for comparatives to be presented for entities that initially apply IFRS 9 for reporting periods beginning on or after 1 January 2012.  Do you agree?  Why or why not?  If not, what alternative do you propose?

The Draft published has received approval by all 15 members of the IASB 

Hans Hoogervorst (Chairman), Ian Mackintosh (Vice-Chairman), Stephen Cooper, Philippe Danjou, Jan Engström, Patrick Finnegan, Amaro Luiz de Oliveira Gomes, Prabhakar Kalavacherla, Elke König, Patricia McConnell, Takatsugu Ochi, Paul Pacter, Darrel Scott, John T Smith, Wei-Guo Zhang

Conclusion

IFRS 9 effective was considered to be delayed (effective date January 1^st 2013) only if:

a)      The delay was inevitable to the phase of the project to replace IAS 39

b)      On the insurance contracts a date post 2013 had been decided to avoid the dilemma of the insurer in having to face two rounds in short period.

For periods beginning before January 1^st 2013 the impairment and hedge phases of the project to replace IAS 39 will not be obligatory. Plus new necessities for accounting the insurance contracts will not have an obligatory effective date as on January 1^st 2013.

The Board recommended that the obligatory effective date of the IFRS 9 (2009) and IFRS 9 (2010) should be postponed to January 1^st 2015. But the Board also stated that the earlier applicants of the IFRS 9 still be in force.

The entities that take up IFRS before January 1^st 2012 need not paraphrase prior periods. The Board felt that putting aside the restates provides a balance between the conceptuality preferable methods of retrospective application. The Board noted that some respondents have requested that the relief from providing comparatives should be extended, particularly in view of the requirement to continue to apply IAS 39 to financial instruments that are derecognized prior to the date of initial application of IFRS 9. However, the Board’s rationale for its decision on comparative relief when issuing IFRS 9 has not been affected by changes in circumstances (i.e. unlike the mandatory effective date). The entities that apply IFRS 9 for reporting periods on or after January 1^st 2012 the Board recommends not to amend the requirements.