Financial instruments – Introducing IFRS 9

Financial instruments – Introducing IFRS 9

Our insight and analysis on the impact of IFRS 9 Financial Instruments

Chris Spall, KPMG's global IFRS financial instruments leader and a partner at KPMG IFRG Limited


KPMG in the UK


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The completion of IFRS 9 marks a breakthrough in financial instruments accounting.

IFRS 9 (2014) Financial Instruments brings fundamental changes to financial instruments accounting. 

The impact of the new standard is likely to be most significant for financial institutions. For banks in particular, the effects of adoption – and the effort required to adopt – will be especially great. However, businesses in all sectors will need to identify the impact of IFRS 9.

Our suite of publications can help you to understand the new requirements and the possible impacts for your business – from high-level summary (PDF2.27 MB) to detailed commentary (PDF 654 KB) and interpretative guidance.

What's new in IFRS 9?

The new standard presents revised guidance on the classification and measurement of financial assets, including a new expected credit loss model for calculating impairment. 

It supplements the new general hedge accounting requirements published in 2013.


“The new standard is going to have a massive impact on the way banks account for credit losses on their loan portfolios. Provisions for bad debts will be bigger and are likely to be more volatile.”

What's new for classification and measurement?

The permissible measurement bases for financial assets – amortised cost, fair value through other comprehensive income (FVOCI) and fair value through profit and loss (FVTPL) – are similar to IAS 39 Financial Instruments: Recognition and Measurement

However, the criteria for classification into the appropriate measurement category are significantly different.

Embedded derivatives are no longer separated from financial asset hosts; instead, there is a new method for assessing the entire hybrid instrument. 

What's new for impairment?

IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with an ‘expected credit loss’ model, which means that a loss event will no longer need to occur before an impairment allowance is recognised. 

The standard aims to address concerns about ‘too little, too late’ provisioning for loan losses, and will accelerate recognition of losses.

The new model will apply to financial assets that are:

  • debt instruments recognised on-balance sheet, such as loans or bonds; and
  • classified as measured at amortised cost or at FVOCI.

It will also apply to certain loan commitments and financial guarantees.

Our IFRS newsletter: IFRS 9 Impairment highlights the discussions of the IFRS Transition Group for Impairment of Financial Instruments on these requirements.

What could the changes mean for you?

The standard is effective for annual periods beginning on or after 1 January 2018, and applies retrospectively with some exemptions. Early adoption is permitted.

However, implementing the far-reaching impacts of these changes may take considerable effort – especially for those companies in the financial sector.

Where can you learn more?

Read our In the Headlines (PDF 3.21 MB) for a high-level summary of the new requirements and their possible impacts for your business. 

Our First Impressions (PDF 468 KB) provides our detailed commentary, pooling the insights and experience of our financial instruments teams globally to guide you through the requirements of the new standard.

And Insights into IFRS provides our complete work of interpretative guidance on the new standard.

Our IFRS – Financial instruments hot topics page presents our latest thinking on the new standard, along with our commentary on emerging implementation issues.

It also brings you the latest developments on other aspects of financial instruments accounting under IFRS.

© 2021 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.

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