From 2019 the new financial instruments standard, TFRS 9, will apply to all publicly accountable entities, not just financial institutions. The new standard brings major changes to how you classify and measure financial assets and financial liabilities, and record impairment. It also brings a new hedge accounting model that is aligned with risk management and extensive new disclosures.
- Classification and measurement may change due to new criteria thatrequire an assessment of the contractual cash flows and how theinvestment is managed
- The new impairment model, which is based on expected credit losses and forward-looking information, will increase provisions and may require new processes and controls
Trade and lease receivables and contract assets
- Bad debt provisions are likely to increase and become more volatile
Derivatives and Hedge accounting
- All derivatives will need to be recorded in the balance sheet at fair value which could create significant volatility in earnings
- Hedge accounting is potentially available for a broader range of hedging strategies
- The new hedging model will require more judgement and revised processes and controls
- Extensive new disclosures are required
- System and controls changes may be necessary to capture the required data
View the pdf below to find out more on the potential impact and actions you should consider.
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