• AASB 9

    Financial Instruments

AASB 9 Financial Instruments

Background

AASB 9 Financial Instruments significantly changes the financial reporting landscape for how entities account for financial instruments.

Entities need to be across the changes they need to make, in order to be able to prepare their financial statements using the new accounting standard. The changes required can be complex and have effects beyond just the accounting treatment.

Adoption of AASB 9 involves the preparer making a number of choices as to how to apply the standard, including making a decision as to which transition route to employ. As the choices made will affect the way the performance of a business is measured and reported, it is vital to consider not only the commercial and practical issues, but also the tax implications of these changes.

Our experts in this area can help you establish the impacts of this new standard and advise on what actions you should be taking.

Impacts of AASB 9 Adoption

The effect of adopting the new financial instruments standard raises many questions such as:

  • How will reported results be impacted?
  • Which financial assets need to be recorded at fair value?
  • Which processes and systems will need changing?
  • Should the standard be adopted early?
  • Which wider business planning activities will be affected?
  • Should this trigger an assessment of the entity’s risk management strategy (including hedging and hedge accounting)?
  • What staff training will be required?
  • How will current agreements be affected?

AASB 9 – Industry Heat Map

As a guide the heat map below considers the relative level of impact and complexity when adopting AASB 9.

Red Red denotes a high level of potential impact and complexity.
Amber Amber denotes a medium level of potential impact and complexity.
Green Dark teal denotes a low level of potential impact and complexity.
Industry

Receivables that fail SPPI* test

Measurement of unlisted equity investments

Impairment of short term receivables

Impairment of long term receivables

Hedging

Retail

Green Amber Green Green Red

FMCG

Green Amber Amber Green Red

Software

Red Red Amber Green Green

Building and construction

Red Amber Amber Amber Red

Residential real estate construction

Red Amber Amber Amber Red

Manufacturing

Green Amber Amber Amber Red

Mining

Red Red Green Green Red

Professional Services

Green Green Amber Green Green

* Solely payments of principal and interest

Steps to Implementation

The adoption of AASB 9 should be viewed as three very distinct projects:

Steps to Implementation - IFRS 9

Classification & Measurement

Impairment

Hedging

Further Details

Please see the AASB 9 Fact Sheet for further information including:

  • Commercial and practical considerations
  • A checklist of complex issues
  • The tax impacts; and
  • Consideration of the adoption methodology.