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Tax Implications of Adoption of IFRS9 on Financial Instruments in Nigeria

Tax Implications of Adoption of IFRS9

Since 2001, IAS 39 Financial Instruments - Recognition and Measurement has been the accounting standard for financial instruments. However, the Standard was affected by several shortcomings, such as complex and rules-based classification methods for financial instruments, multiple impairment models, and inability to reflect economic realities.

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Since 2001, IAS 39 Financial Instruments - Recognition and Measurement has been the accounting standard for financial instruments.  However, the Standard was affected by several shortcomings, such as complex and rules-based classification methods for financial instruments, multiple impairment models, and inability to reflect economic realities.

In response to the shortcomings of IAS 39, the International Accounting Standards Board (IASB) completed the final phase of its comprehensive response to the global financial crisis of 2008 with the publication of the fourth and final version of IFRS 9 Financial Instruments in July 2014.  IFRS 9, which replaces IAS 39, is effective for annual periods beginning on or after 1 January 2018, though early application is permitted.

 Expectedly, the adoption of IFRS 9 will have a significant impact on how Deposit Money Banks (DMBs), Other Financial Institutions (OFIs) and Insurers account for credit losses on their loan and other debt instruments. It is, therefore, important for DMBs particularly, and other companies within the financial services space, to assess the tax impact of the adoption of IFRS 9 in order to take advantage of available tax planning opportunities well ahead of implementation. This article highlights some of the potential tax implications of adopting IFRS9.

© 2018 KPMG Professional Services in Nigeria, a limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

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