Updated: Nov 15, 2018
IFRS 9 (Financial Instruments) and Updated IFRS 7 (Financial Instruments Disclosure)
The International Accounting Standards Board (IASB) published IFRS 9 with an effective date of annual periods beginning on or after 1 January 2018, IFRS 9 also makes consequential amendments to IFRS 7, requiring a significant number of additional disclosures. Due to significant changes in risk management concepts and practices over the years, new techniques have been developed for measuring and mitigating risk exposures pertaining to financial instruments. These factors have pushed for disclosures which are more transparent and relevant, relating to risk exposures from financial instruments and how these risks are mitigated. Such information can influence a user’s assessment of the financial position and financial performance of an entity or of the amount, timing and uncertainty of its future cash flows. Greater transparency regarding those risks allows users to make more informed judgements about risk and return.
IFRS 7 sets out disclosure requirements that are intended to enable users to evaluate the significance of financial instruments for an entity's financial position and performance, and to understand the nature and extent of risks arising from those financial instruments to which the entity is exposed. These risks include credit risk, liquidity risk and market risk. IFRS 13 requires disclosure of a three-level hierarchy for fair value measurement and requires some specific quantitative disclosures for financial instruments at the lowest level in the hierarchy.
These disclosure requirements are not only relevant to financial institutions, but all entities that have financial instruments, including simple instruments such as borrowings, accounts payable and receivable, cash and investments.
IFRS 15 (Revenue from contracts with customers)
The International Accounting Standards Board (IASB) published IFRS 15 with an effective date of annual periods beginning on or after 1 January 2018. IFRS 15 replaces both IAS 11 and IAS 18 as well as SIC 31, IFRIC 13, IFRIC 15 and IFRIC 18 and establishes a single, comprehensive framework for revenue recognition. The core principle of the standard is that revenue is recognised to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services.
IFRS 15 requires a five-step approach to revenue recognition: step1 - Identify the contract(s) with a customer; Step 2 - Identify the performance obligations in the contract; Step 3 - Determine the transaction price; Step 4 - Allocate the transaction price to the performance obligations in the contract; and Step 5 - Recognise revenue when (or as) performance obligations are satisfied. IFRS 15 also includes requirements for accounting for costs related to a contract with a customer. These are recognised as an asset if certain criteria are met.
The standard requires qualitative and quantitative disclosures in respect of revenue, contract balances, performance obligations, significant judgements and assets recognised from costs to obtain or fulfil a contract.