International Financial Reporting Standard 9 (“IFRS 9”) is the accounting standard for financial instruments, which defines the classification, measurements and impairment of financial instruments. It is designed to make annual reports more meaningful to investors as well as simplify how auditors implement the rules and introduce safeguards to limit credit losses. In July 2014, after several years of delay, the accounting regulators published the final text of IFRS 9. This combines revised versions of previously published sections with the first publication of the final and most controversial impairment section. IFRS 9 will become effective in 2018.

Through a mix of lecture and case studies, this IFRS and financial instruments training will equip participants to achieve a detailed understanding of the latest IFRS 9 standard, both for financial assets, liabilities and derivatives.

Course Aim

•To provides an in-depth analysis of IFRS 9 Financial Instruments
•To help preparers and users of financial statements to evaluate the impact of IFRS 9 on the business and its financial statements.

Target Audience

•Financial and management accountants in corporate and financial institutions
•Staffs that are in treasury, operations, risk management, IT or compliance departments
•Internal auditors of entities reporting under IFRSs
•External auditors
•Financial analysts seeking to improve their understanding of the accounting and disclosures related to financial instruments and the changes introduced by IFRS 9
•First-time adopters of IFRSs, seeking to analyse the implications of applying IFRS 9 initially
•CPA, Professionals implementing IFRS
•CPA, IFRS Professionals, Accounting Professionals, ACCA, Chartered Accountants, CFO, Senior and Mid Management Professionals In Finance etc.


Course Objective

By the end of this course, the participants will have:

•Understand IFRS 9 & develop expertise in IFRS 9
•Classify and measure financial assets under the three categories in IFRS 9
•Analyse the impact of IFRS 9 on the classification of financial assets, including embedded derivatives
•Classify and measure financial liabilities under the two categories in IFRS 9
•Evaluate the principles of fair value measurement in IFRS 13
•Apply the principles in relation to de-recognition of financial assets
•Calculate the impairment loss on loans and other financial assets under the expected credit loss model in IFRS 9
•Analyse the estimates and judgements in the expected credit loss impairment model
•Apply the hedge accounting model in IFRS 9 and learn how it is aligned more closely to common risk management practices compared to IAS 39



Course Overview

Introduction

•What is IFRS 9? How does it differ from IAS 39?
•What are financial assets and financial liabilities?
•IFRS 9 history and implementation overview

Financial Assets Classification & Measurement

•Presentation of the three different categories
oAmortised costs,
oFair value through profit & loss (FVTPL) and
oFair value through other comprehensive income (FVTOCI).
•Accounting treatment determined by business model and nature of cash flows
•Decision tree to decide on classification of financial instruments
•Balance sheet and P&L calculation of a bond at amortized cost
oBased on the Internal Rate of Return (IRR) of future cash flows
oTreatment of fees in the IRR calculation
•Balance sheet and P&L calculation of a bond at FVTPL and FVTOCI
oEffective interest rate method for interests (same as amortised costs)
oUnrealised gain based on NPV at current yield of future cash flows
•Reminder on determining fair value
oLevel 1 based on unadjusted quoted price
oLevel 2 based on quoted price in inactive markets or observable model input
oLevel 3 based on unobservable but significant inputs to the overall value

Financial Assets Impairments

•Applies to amortized cost and FVTOCI portfolios
•Incurred losses (IAS 39) has been replaced by expected losses (IFRS 9)
•Three stages process to determine impairments
oStage 1: “12-month expected credit losses” with effective interest rate on gross on gross carrying amount
oStage 2: “life-time expected credit losses” with effective interest rate on gross on gross carrying amount
oStage 3: “life-time expected credit losses” with effective interest rate on gross on amortised costs
•Interest income based on gross carrying amount or amortised costs
•Accounting treatment for financial instruments already impaired when acquired

Financial Liabilities & Own Credit

•Financial liabilities at amortised cost or FVTPL
•Own credit deterioration reduces institutions’ liabilities
•Liability reduction due to rating downgrade to be now classified in OCI











Hedge Accounting

•Qualification for hedge accounting
•Different types of hedge accounting, same as IAS 39, except for time value of money and forward points in foreign exchange forward
oCash flow hedge
oFair value hedge
oNet investment hedge for foreign subsidiaries
•IFRS 9 hedge accounting more closely aligned to risk management policy
oRemoval of hedge effectiveness criteria (80% to 125%)
oExtends eligibility of risk component to include non-financial items
oPermits aggregate exposure that includes a derivative to be eligible hedged item
oGroup of items and a net position (e.g. assets & liabilities or forecast sales & purchases) hedged collectively as group
•Eliminating the distinction between financial & non-financial components
•Different types of hedge accounting

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