Impact of IFRS 9 (AASB 9) on Accounting for Financial Instruments in Reports

IFRS 9 Financial Instruments (AASB 9) was issued to replace IAS 39 (AASB 139)
Discuss critically the shortcomings and criticisms of IAS 39 (AASB 139) which have given rise to
IFRS 9 (AASB 9). How will the application of IFRS 9 (AASB 9) impact on the accounting for financial instruments in financial reports? Your discussion should be illustrated and informed by reference to two listed companies (ASX or other sources for the most recent years), that are either using IAS 39 (AASB 139) or that have decided to early adopt IFRS 9 (AASB 9).

Introduction

The IASB currently is revising its accounting requirements for financial instruments. The objectives of the project include improving the decision-usefulness of financial statements for users by simplifying the classification and measurement requirements for financial instruments (NF6).

With the

awareness of the shortcomings and criticisms of IAS 39 (AASB 139), IASB has issued a new financial instruments standard referred to as IFRS 9 Financial Instruments. This paper will, with scholarly thorough research, discuss about the matter of the IFRS 9 application and its impact on the accounting for financial instruments in financial reports. Two chosen companies will be exemplified to portrait a better picture regarding the impact of the replacement.

IAS 39 (AASB 139)
AASB 139 requires:
• financial assets and liabilities to be recognised in the balance sheet;
• financial assets to be classified into one of four categories;
 financial Assets at Fair Value through Profit and Loss;
 held-to-Maturity Investments;
 loans and Receivables; and
 available-for-Sale Financial Assets.

• financial liabilities to be classified into one of two categories;
 financial Liabilities at Fair Value through Profit and Loss; and
 Other Financial Liabilities.
• Initial measurement of financial assets and liabilities at fair value;

• Financial assets and liabilities to be measured, subsequent to initial