05 May 2015

EFRAG seeks comments on its draft endorsement advice on IFRS 9 Financial Instruments

EFRAG has issued a draft endorsement advice letter (with supporting appendices) and a separate Invitation to Comment relating to the endorsement for use in the EU of IFRS 9 Financial Instruments (the Standard). Comments are requested by 30 June 2015.

IFRS 9 replaces most of the requirements of IAS 39 Financial Instruments: Recognition and Measurement with a principle-based and less complex standard. IFRS 9 changes the classification requirements for financial assets, using a single approach for all types of financial assets. Only basic lending instruments are potentially eligible for measurement at amortised cost and all other financial assets are measured at fair value. Measuring all non-basic lending instruments at fair value has led to the elimination of the multiple impairment models in IAS39 and the design of a single model based on the principle of expected, rather than incurred, credit losses results in earlier recognition of credit losses. The hedge accounting requirements more closely align hedge accounting with risk management practices.

IFRS 9 becomes effective for annual periods beginning on or after 1 January 2018, with earlier application permitted.

EFRAG's overall preliminary assessment is that IFRS 9 satisfies the criteria for endorsement for use in the EU and therefore recommends its endorsement.

EFRAG is seeking comments on all aspects of its analyses supporting its preliminary conclusions.

EFRAG emphasises that it has reached its preliminary conclusions relying on limited quantitative assessments, despite its efforts to gather quantitative data, in particular on the impact of the new impairment model. Input received reflects that these quantitative data may not be available on a broad basis before 2017. EFRAG wishes to assess whether its preliminary conclusion that it would be detrimental to European public good to delay IFRS 9 endorsement is supported by European stakeholders.

Finally, EFRAG wishes to gain more insight into the impact on financial reporting by insurance businesses of adopting IFRS9 before the effective date of the future insurance contracts standard to comfort its view that the IFRS 9 mandatory effective date should be deferred for all insurance businesses until the new insurance contracts standard is implemented or becomes of mandatory application.

Press release

Draft endorsement advice

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