Depending on your organisation, transitioning to AASB 9 can be complex. If not already commenced, the time to start your transition journey and impact assessment is now.
AASB 9 applies for reporting periods beginning on or after 1 January 2018.
The new financial instruments standard, AASB 9 Financial Instruments is effective from 1 January 2018. The new standard addresses classification and measurement of financial assets and liabilities, provides a new set of hedge accounting rules and prescribes new principles on the impairment of financial assets. The new standard is expected to have broad implications for entities across various industries, not just those in the financial services sector.
The transition requirements of the new standard are complex and require various assessments to be made at different points in time. Our publication Practical Guide: AASB 9 Financial Instruments – Transitioning will help you understand the principles, requirements and disclosures on transition to the new standard.
“AASB 9 transitioning rules are complex. Entities that are restating their comparatives may have to provide additional information to facilitate comparability.”
Classification and measurement (including impairment)
The three main transition principles for classification and measurement, including impairment, are:
The hedge accounting requirements of AASB 9 are applied prospectively except for the cost of hedging. Applying the hedge accounting requirements prospectively means that entities cannot backdate hedge relationships that are only allowable for hedge accounting under AASB 9.
In applying the classification and measurement requirements on transition to
AASB 9, there are two key dates where assessments are required to be made:
The transition provisions provide for a number of practical expedients relating to classification and measurement. These expedients relate to investments in hybrid contracts, financial assets with modified time value or prepayment features and instances where it is impracticable to retrospectively apply the effective interest rate method. Practical expedients are also available for impairment.
Our Practical Guide: AASB 9 Financial Instruments – Transitioning publication provides an overview of the transition options and expedients.
It provides KPMG’s insight on the requirements and how to transition – practical examples of accounting for the transition and the expedients available under the new standard.