IFRS 9: Financial

Instrument
Definition
Classification and measurement
Impairment
Hedge accounting
 Definition
Financial instrument: Any contract that gives rise to both a
financial asset of one entity and a financial liability or equity
instrument of another entity.

Financial Asset : (a) Cash (b) An equity instrument of another

entity (c) A contractual right to receive cash or another financial
asset from another entity; or to exchange financial instruments
with another entity under conditions that are potentially
favourable to the entity

Financial Liability : A contractual obligation: (i) To deliver cash

or another financial asset to another entity, or (ii) To exchange
financial instruments with another entity under conditions that are
potentially unfavourable;

Financial Equity : Any contract that evidences a residual interest

in the assets of an entity after deducting all of its liabilities.
Classification and
Measurement :-
Financial Asset :

Initial measurement = FV including transaction cost, unless classified as

FVTPL
Subsequent ;
Fair Value to Profit or Loss (eg, Held-for-trading)
Fair Value to Other Comprehensive Income (eg, Available-for-sale)
Amortised Cost (if, fulfils BOTH..)
Business Model (hold the FA to collect cash flow)
Contractual Cash Flow (payment of principal and interest)
Derecognition = when Financial Asset is sold

Financial Liability :

Initial = At FV net of transaction cost

Subsequent ;
Amortised Cost
Fair Value to Profit or Loss
Derecognition = when Financial Liabilty have been paid in full or transferred
to another party
Impairment :-
ONLY apply to Financial Asset held at amortised cost.

Uses the expected credit loss model,

Step 1 : No signifcant deterioration in credit quality

PV of 12 months expected credit losses (i.e after reporting
date)
Step 2 : Significant deterioration in credit quality
Impairment recognised at PV of expected credit shortfall
Step 3 : Objective evidence on an impairment
Lifetime expected credit losses
Hedging
Highly likely future cash flow may fluctuate.

Types and treatment of hedging :

Fair Value Hedge

Gain/loss on instrument is recognised to SPL
Gain/loss under hedge item is also recognised to SPL

Cash Flow Hedge

Gain/loss on effective portion of instrument is recognised in OCI
Gain/loss on ineffective portion recognised to SPL