IFRS 9 Financial Instruments, issued at 1 January 2012, specifies how a company has to classify and measure financial assets and liabilities.  Financial assets shall be classified using the company´s business model for managing financial assets and the contractual Cash Flow (CF) characteristics of the financial asset.

Financial assets are:

  • measured at amortised cost if the following conditions are met:
    • the asset is held within a business model whose objective is to hold assets in order to collect contractual CF
    • the contractual terms of the financial asset gives rise on specified dates to CF that are solely payments of principal  and interest on the principal amount outstanding

otherwise it shall be measured at fair value (FV) through profit or loss.

When a company changes its business model for managing financial instruments it shall reclassify all affected financial assets.

For more information of financial liabilities (cf. IFRS, 2012)


IFRS 9 was originally issued in 11/2009 prescribing the classification and measurement of financial assets completing the first phase of replacing IAS 39 Financial Instruments Recognition and Measurement.

IFRS 9 is limited to financial assets whereas IAS 39 also contains financial liabilities.

The 2nd (Impairment methodology) and 3rd phase (Hedge accounting) of replacing IAS 39 are still in progress with the aim to make it easier to assess the amounts of CFs arising from financial assets. IFRS 9 achieves this aim by aligning the measurement with the company´s business model (the way the entity manages its financial assets) and its contractual CF characteristics by for example a single impairment method for all financial assets not measured at FV.  IFRS 9 requires that companies/entities classify financial assets on the basis of the objective of the entity´s business model for managing financial assets and the characteristics of contractual CF. Contractual CF are considered only if financial assets are eligible to be measured at amortised cost. IFRS 9 requires also that financial assets that purchased in the secondary market have to be measured at amortised cost if their business model has the objective to collect contractual CF aid.

If gains and losses on equity instruments measured at FV in other comprehensive income, dividends have to be recognised in other comprehensive income of profit and loss.

Reclassification between amortised cost and FV classified when the business model changes.

Requires additional disclosure for all entities first applying IFRS.

Improvements in IFRS 9
Financial assets are classified in one of two measurement categories instead of four depending of entity´s business model and contractual CF terms.
Instruments measured at amortised cost are subject to impairment. IAS 39 required impairment for financial assets measured at FV.
New presentation option for strategic equity investments.
All equity investments have to be measured at FV. There is no exception for unquoted equity instruments anymore.
Additional disclosures are required.


(cf. IASplus, 2012)

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