Financial Instrument –

IFRS 9

Muhammad Ibrahim
26 November 2022
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About Speaker
Muhammad Ibrahim Muhammad Ibrahim is a “Professional Accounting Affiliate” from institute of
chartered accountants of Pakistan with diversified experience of more
than 6 years in the field of accounting, finance, financial modelling and
assurance services.

Currently, he is working as “Managerial role” in one of the leading audit

firms in Saudi Arabia, RSM. Previously, he worked with Deloitte in Pakistan.
During his working experience he has an exposure of handling listed clients
such as Banking institutions, Funds and manufacturing companies. He
gained solid experience of IFRS conversion & compliance, assurance,
internal controls, Financial modelling, financial feasibilities and business
valuations.

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Content

Overview of IFRS 9 - Financial Instruments

Summary of IAS 32 - Financial Assets and Financial Liabilities

Classification of Financial Instruments

Measurement of Financial Instruments

Impairment of Financial Instruments

Q&A and Next CPD event

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OVERVIEW OF IFRS 9 - FINANCIAL
INSTRUMENTS

IFRS 9 is the IASB’s IFRS 9 addresses the accounting for

replacement of IAS 39 financial instruments containing three main
topics: CLASSIFICATION and
Financial Instruments: MEASUREMENT of financial
recognition and measurement. instruments, IMPAIRMENT of financial
assets and HEDGE ACCOUNTING

We will not cover Hedge Accounting and Derecognition in our today topic due to interest of time.

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WHY IFRS 9 ?
IFRS 9 establishes principles for the financial
reporting of financial assets and financial liabilities.

Items to be noted:

• IFRS 9 does not define financial instruments.

• IFRS 9 does deal with the equity instruments.
• IFRS 9 does not deal with your investments in
subsidiaries, associates and joint ventures.

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Financial Assets
In line with IAS 32.11, a financial assets is any asset that is:

• Cash
• An Equity Instrument of another entity
• A Contractual Right to
➢ Receive cash or another financial asset from another entity; or
➢ Exchange financial assets or financial liabilities with another entity under conditions that are
potentially favorable to the entity.
• A Contract that will or may be settled in the entity's own equity instruments and is:
➢ A non-derivative for which the entity is or may be obliged to receive a variable number of the
entity's own equity instruments.
➢ A derivative that will or may be settled other than by the exchange of a fixed amount of cash or
another financial asset for a fixed number of the entity's own equity instruments.

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Financial Liabilities
In line with IAS 32.11, a financial liability is any asset that is:

• Contractual obligation to:

➢ Deliver cash or another financial asset from another entity
➢ Exchange financial assets or financial liabilities with another entity under conditions that are potentially
unfavorable to the entity
• A Contract that will or may be settled in the entity's own equity instruments and is:
➢ A non-derivative for which the entity is or may be obliged to deliver a variable number of the entity's own
equity instruments.
➢ A derivative that will or may be settled other than by the exchange of a fixed amount of cash or another
financial asset for a fixed number of the entity's own equity instruments.

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HOW
TO CLASSIFY ? FINANCIAL ASSETS

IFRS 9 Classifies financial assets based on TWO characteristics:

✓ BUSINESS MODEL ✓ What is the objective of holding financial assets?

TEST Collecting the contractual cash flows? Selling?

✓ CONTRACTUAL ✓ Are the cash flows from the financial assets on the
CASH FLOWS specified dates solely payments of principal and
CHARACTERISTICS interest on the principal outstanding? Or,
TEST ✓ Is there something else?

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Muhammad Ibrahim Financial Instruments – IFRS 9
HOW
TO CLASSIFY ? FINANCIAL LIABILITIES

IFRS 9 Classifies financial liabilities as follows:

✓ FINANCIAL LIABILITIES
✓ These financial liabilities are subsequently measured at
AT FAIR VALUE TROUGH
fair value and all DERIVATIVES belongs in this section.
PROFIT OR LOSS

✓ MEASURED AT ✓ Other financial liabilities measured at amortized cost

AMORTIZED COST USING THE EFFECTIVE INTEREST METHOD.

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HOW
TO MEASURE ? FINANCIAL INSTRUMENTS

IFRS 9 measures financial instruments as follows:

✓ Fair value: all financial instruments at fair value through

profit or loss;
✓ INITIAL MEASUREMENT ✓ Fair value plus transaction cost: all other financial
instruments (at amortized cost or fair value through other
comprehensive income).
Subsequent measurement depends on the category of a
financial instrument
✓ SUBSEQUENT ✓ Financial assets shall be subsequently measured either at fair
MEASUREMENT value or at amortized cost;
✓ Financial liabilities are measured at amortized cost unless the
fair value option is applied.

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 MEASUREMENT
SYNOPSIS
Financial Assets + Financial Liabilities:
Subsequent measurement
SUBSEQUENT FA + FL FA + FL
MEASUREMENT: At Fair Value At Amortized Cost
Fair Value though P/L Fair Value though OCI

EQUITY DEBT
INSTRUMENTS INSTRUMENTS Amortized cost using
the effective interest
FV Gains / Losses ✓ Fair value, with all gains and
Fair value, with all ✓ Fair value, with all gains method. (P/L)
Foreign Exchange losses (other than those
and losses recognized in
Impairment – FA gains and losses OCI.
relating to impairment, which
Interest, Dividends are included in P/L) being
recognized in P/L. ✓ Changes in fair value are
recognized in OCI.
not subsequently recycled
✓ Changes in fair value recorded
to P/L.
in OCI are recycled to P/L on
✓ Dividends are recognized
derecognition or
in P/L.
reclassification.

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Muhammad Ibrahim Financial Instruments – IFRS 9
Thank you for Your Active Participation

Speaker’s IFA members annual return &

contact details renewal

Muhammad Ibrahim • Please renew your annual membership

Ibrahim.apr99@gmail.com
+966-56-4831038
of 2023 by paying the annual fee
• Members to submit the annual return by
login your membership account over
the IFA website.
(A video guide is available at YouTube >
InstituteFA > How to complete your
membership return)

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