IFRS 9, now effective for annual periods beginning on or after 1 January 2018, requires that you be aware of its effect to implement it. You will have an overview of the changes brought in by the new standard. Although IFRS 9 is very detailed oriented, you will know what areas have been affected, how to look for the changes brought in by the new standard, and where to find how you should account for these changes.

The new IFRS 9 specifies some changes in many areas including initial measurement of financial instruments, subsequent measurement of financial assets, debt instruments, fair value option, equity instruments, other comprehensive income option, measurement guidance, subsequent measurement of financial liabilities, derecognition of financial assets, derecognition of financial liabilities, derivatives as well as embedded derivatives, reclassification, hedge accounting, impairment, presentation, disclosures, and interaction with IFRS 4. This is critical especially for the financial sector whose main assets are mostly financial instruments.

Because IFRS 9 is now a regulatory requirement, it will be mandatory for the next financial statement you help prepare follow its demands. You may be familiar with the old IFRS 9, but you still need to know and understand the implications of all the changes introduced by the new standard. Auditors will be looking specifically for the correct application of this standard. It will affect some entities in a big way, perhaps altering their balance sheet more than they dared to believe. It will affect many large entities in the financial industry as well as entities that depend on financial instruments. The new IFRS 9 specifies changes in many areas such as how financial assets and liabilities are recognized and “de-recognized, “and valued as well substantially increasing disclosure requirements. Auditors will need to understand the requirements of the new standard, management will have to base decisions on knowledge of this standard to maximize benefits from using financial instruments. In addition, it introduces specific rules about insurance contracts, which means that the interaction between IFRS 4 and IFRS 9 will have to be considered.

Like it or not, we will all have to adopt this standard. It is here to stay.

Stay tuned for next month’s update.

A Certified Public Accountant, business author of several books (including IFRS Simplified”) Mike Morley is an entertaining and informative speaker, a recognized authority in the field of finance, and offers various training programs, such as IFRS, SOX, and Financial Statement Analysis that focus on providing continuing education opportunities for finance and accounting professionals. His website (mikemorley.com) features an upcoming webinar about the new IFRS 9.