If the contractual cash flows of a financial asset are modified or renegotiated in such a way that does not result in derecognition of that financial asset under IFRS 9 Financial Instruments, entities should recalculate the gross carrying amount of the financial asset on the basis of the renegotiated or modified contractual cash flows. IFRS 9 . However, the IFRS The new standard IFRS 9 on the accounting of financial instruments, effective from 1 January 2018, removes one of the widely used accounting treatments for debt restructuring transactions previously allowed under the old standard IAS 39. Modification gain or loss is the amount arising from adjusting the gross carrying amount of a financial asset to reflect the renegotiated or modified contractual cash flows.. IFRS 9 describes requirements for subsequent measurement and accounting treatment for each category of financial instruments. Although the classification and measurement of financial assets under IFRS 9 represents a significant change to IAS 39 – it will in many cases bring little change to those entities that hold trade receivables, which will remain carried at amortised cost. The Standard includes requirements for recognition and measurement, impairment, derecognition and general hedge accounting. The new requirements force … Intra-group balances could be more problematic and require detailed assessment. FVTPL3. Fair value through other comprehensive income (FVTOCI) for debt and4. IFRS 9 for banks – Illustrative disclosures PwC 1 This publication presents illustrative disclosures introduced or modified by IFRS 9 ‘Financial instruments’ for a fictional bank. Deloitte’s publication, Impact of transition from IAS 39 to IFRS 9 on the exchange of or modification of financial liabilities, clarifies, that, under IFRS 9 a gain or loss should be recognised at the time of a non-substantial modification, and for this reason, modifications of financial instruments are particularly important under IFRS 9. IFRS 9 Financial Instruments is the IASB’s replacement of IAS 39 Financial Instruments: Recognition and Measurement. The entity recognises any adjustment to the amortised cost of the financial liability in profit or loss as income or expense at the date of the modification or exchange. 3.2 Modification of a financial asset In accordance with IFRS 9:3.2.3, an entity should derecognise a financial asset when, and only when: • the contractual rights to the cash flows from the financial asset expire (see 3.1.3 ); or they are non-substantial). Modification of financial liabilities - IFRS 9 changes accounting The IASB recently discussed the accounting for modifications of financial liabilities under IFRS 9 Financial instruments. Financial assets under IFRS 9 - The basis for classification has changed. FVTOCI for equity. This module is perfect for any student or professional wanting to master IFRS 9 and IAS 32 quickly. IFRS 9.B3.2.1 provides a flowchart to illustrate the evaluation of whether and to what extent a financial asset is derecognised . An entity shall derecognise a financial asset only when the contractual rights to the cash flows expire or it transfers the financial asset and that transfer qualifies for derecognition. Derecognition of Financial Liabilities (IFRS 9) Last updated: 3 June 2020 Derecognition is the removal of a previously recognised financial liability from an entity’s statement of financial position. There are times when a financial asset is derecognised simply because the rights to the cash flows have expired. The standard was published in July 2014 and is effective from 1 January 2018. IFRS 9 has now been applicable for over a year, but some of its changes have often been either overseen or neglected—even when they could have a material impact on the accounts. policy under IAS 39, the impact on transition to IFRS 9 should be considered. Next, lenders should assess whether the purpose of the modification is solely to forgive a part of the cash flows. See also separate page on derecognition of financial assets. Module 4: Derecognition and Modification of Financial Assets Module 5: Financial Liabilities vs Equity Instruments. Standard includes requirements for subsequent measurement and accounting treatment for each category of financial under! Includes requirements for subsequent measurement and accounting treatment for each category of financial:... 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