IFRS 9 for Financial Institutions

The implementation of IFRS 9 Financial Instruments (effective for reporting periods starting on or after January 1, 2018) represented a substantial shift in the accounting treatment of financial instruments. This standard had a notable influence on the financial statements of financial institutions and necessitated adjustments to systems and processes to capture the required information in compliance with the standard. It is crucial for financial statement users to comprehend the business implications of adopting this standard. This program will comprehensively delve into the key aspects of IFRS 9 in a practical and interactive manner. The goal is not only to impart an understanding of the accounting principles but also to enable participants to analyze the implications and significant risks for their respective organizations.

Program Objectives:

• Understand the options and consequences of transitioning to IFRS 9.
• Comprehend the methods for recognition and measurement.
• Evaluate the business model approach.
• Handling of embedded derivatives.
• Assessment of the expected credit loss model.
• Summary of hedge accounting principles.
• Examination of disclosure requirements.

MODULES

Module 1: Overview of IFRS 9

This section aims to offer insight into IFRS 9, its implementation timeline, a summary of transitional prerequisites, and an introduction to the main subjects addressed in the standard.

• The Drive for Change: Challenges with IAS 39 and the 2008 global financial crisis
• Implementation of IFRS 9: Effective date and transition prerequisites
• Main Themes in IFRS 9: Recognizing financial instruments, classification and measurement, impairment, de-recognition, and hedge accounting

Module 2: Classification and Measurement of Financial Assets and Financial Liabilities

This section aims to elucidate the categorization of financial assets and financial liabilities, along with the principles for initial and subsequent measurement and de-recognition.

• Classification and measurement of financial assets
• Review of IAS 39 classification and measurement: Fair value through profit or loss, held-to-maturity, loans and receivables, and available-for-sale financial assets
• IFRS 9 classification: Amortized cost, fair value through profit or loss, and fair value through other comprehensive income – distinct treatment for debt and equity instruments
• Fair valuation: Credit valuation adjustment, debit valuation adjustment, and fair value hierarchy
• Embedded derivatives: Simplified approach in IFRS 9
• De-recognition of financial assets: IAS 39/IFRS 9 complexity, IFRS 9 disclosure changes
• Review of IAS 39 classification: Fair value through profit or loss, amortized cost
• Issue of own credit risk: IAS 39 anomaly, IFRS 9 accounting for fair value changes resulting from alterations in the own credit risk of financial liabilities at fair value through profit or loss

Module 3

Impairment of Financial Assets

This section aims to examine the principles inherent in the expected credit loss impairment model and scrutinize its impact on loss provisioning within financial statements.

Incurred losses vs. expected losses

• Review of IAS 39 impairment principles: Application to financial asset categories, objective evidence, and measurement
• Introduction to IFRS 9 impairment model: Background, model scope, and financial and non-financial implications

Application of IFRS 9 impairment model

• Three-stage approach: 12-month expected credit losses, lifetime expected credit losses, calculation of interest income
• Assessment of significant changes in credit risk
• Individual and collective assessment of impairment
• Default: Definition, changes in the risk of default, and estimating expected credit losses
• Purchase/origination of credit-impaired financial assets
• Simplification and practical expedients: Trade receivables, contract assets, lease receivables, and low credit risk assets
• Implementation challenges: Data availability, estimates, judgments, and assumptions

Module 4

Hedge Accounting

This section aims to assess the challenges associated with IAS 39 hedge accounting and how IFRS 9 adopts a more principles-based approach.

Introduction and background to IFRS 9 hedge accounting

• Review of IAS 39 hedge accounting: Types of hedges – fair value, cash flow, and net investment hedge, accounting for different types of hedges.
• Background to IFRS 9: Challenges with IAS 39 hedge accounting, primary areas addressed, and macro hedging.

Module 5: IFRS 9 updates

• New hedged exposures: Risk components, synthetic positions, net positions, equity investments at fair value through other comprehensive income.
• Use of hedging instruments: Non-derivatives, accounting for time value of options, forward points, and foreign currency basis spread.
• Hedging relationship: Hedge effectiveness, modifications, discontinuation.
• Disclosures: Amendments to IFRS 7 financial instruments disclosures.

Delivery Method

This program is taught through a mix of practical activities, theory, group work and case studies. Training manuals and additional reference materials are provided to the participants.

Certification

Upon successful completion of the training, participants will be awarded a certificate of course completion