Understanding IFRS 9 Financial Instruments

Introduction:

Introduced in January 2018, IFRS 9 Financial Instruments represents a major overhaul from the previous IAS 39 standard. This new standard adopts a more logical and principle-based approach to the classification and measurement of financial assets. The IFRS 9 Financial Instruments course is designed to provide participants with an in-depth understanding of this new standard, focusing on the importance of an entity's business model and the characteristics of financial assets' cash flows.

Participants will learn how to recognize and measure expected credit losses, apply hedge accounting principles, and navigate the requirements for asset and liability recognition. The course will also cover relevant disclosures under IFRS 7 and fair value measurement principles outlined in IFRS 13.

Objectives:

By the end of the IFRS 9 training course, participants will be able to:

• Classify and measure financial assets within the three categories defined by IFRS 9.
• Understand the impact of IFRS 9 on the classification of financial assets, including embedded derivatives.
• Classify and measure financial liabilities under the two categories specified by IFRS 9.
• Evaluate the principles of fair value measurement in IFRS 13.
• Apply derecognition principles to financial assets.
• Calculate impairment losses on loans and other financial assets using the Expected Credit Loss (ECL) model in IFRS 9.
• Analyze the estimates and judgments involved in the ECL impairment model.
• Apply the hedge accounting model in IFRS 9 and understand its alignment with risk management practices compared to IAS 39.

Training Methodology:

• Interactive Workshops
• Simulations
• Group Discussions
• Real-life Scenarios
• Expert Lectures

Course Outline:

Unit 1: Introduction to IFRS 9 Financial Instruments Overview

• Status and evolution of IASB standards on financial instruments: IAS 32, IAS 39, IFRS 7, IFRS 9, and IFRS 13.
• Objectives and scope of IFRS 9.
• Differentiating financial assets, financial liabilities, and equity instruments.
• Distinctions between financial liabilities and equity instruments, including compound instruments and offsetting under IAS 32.

Unit 2: Classification of Financial Assets and Financial Liabilities under IFRS 9

• Classification criteria for financial assets and liabilities.
• The Solely Payments of Principal and Interest (SPPI) test.
• Business model assessment.
• Fair value through profit or loss (FVPL) and fair value through other comprehensive income (FVOCI).
• Fair value model designation for low saving and time deposits.

Unit 3: Measurement of Financial Assets and Financial Liabilities under IFRS 9

• Measurement principles for financial assets and liabilities.
• Examples of equity instruments and their treatment.
• Adjustments for fair value changes and deferred tax presentation.
• Measurement considerations for derivatives and embedded derivatives.

Unit 4: Understanding Amortized Cost Financial Assets with IFRS 9

• Detailed look at amortized cost accounting for financial assets.
• Restructuring and jurisdictional issues.
• Guarantees and credit on sight.
• Treatment of repossessed assets.

Unit 5: Derecognition Principles of Financial Assets according to IFRS 9

• Criteria for derecognition of financial assets.
• Transfer or retention of risks and rewards.
• Assessment of control retention and continued involvement.
• Derecognition of financial liabilities.

Unit 6: Losses Review of Financial Assets from the Perspective of IFRS 9

• Expected credit loss (ECL) model: objectives and scope.
• Application of the ECL model to retail collections.
• Forecasting credit losses over the next 12 months and over the life of the loan.
• Identification of significant increases in credit risk.
• Accounting for expected credit losses and simplified disclosures.

Unit 7: Hedging Instruments and Hedge Accounting under IFRS 9

• Overview of hedge accounting and types of hedges.
• Comparison with IAS 39 hedge accounting rules.
• Hedge accounting model under IFRS 9.
• Qualifying criteria, documentation, and effectiveness of hedges.
• Rebalancing, discontinuation, and macro hedging.