IFRS (International Financial Reporting Standards)

In July 2014, after several years of delay, the accounting regulators published the final text of IFRS 9. This combines revised versions of previously published sections with the first publication of the final and most controversial impairment section. IFRS 9 became effective in 2018. 

IFRS 9 introduces a new business model-based approach to classification and measurement of financial instruments; an impairment model based on expected losses and simplification of hedge accounting.

IFRS 9 Financial Instruments requires an Expected Credit Loss (“ECL”) calculation to be performed to determine the amount recognised in financial statements as the potential impairment to accounts receivable and loans outstanding. This is supported by disclosures required by IFRS 7 Financial Instruments Disclosures. 

The situation created by Covid-19 creates unforeseen challenges to the application of the IFRS 9 ECL calculation. 

This course provides an in-depth analysis of principles of IFRS 9. The course has numerous examples and illustrations to explain the business model and cash flow characteristics test for classification of financial assets, amortised cost and fair value measurement of financial assets and financial liabilities, de-recognition of financial assets (retained servicing, continuing involvement etc.), measurement of expected credit losses and the accounting and impact of different types of hedges on financial statements.  

In addition, it covers the financial instruments disclosures in IFRS 7 and principles in relation to fair value measurement in IFRS 13. ??? 

The key course benefits will be: 

• Be able to set up appropriate provisions and contingencies for loans and trade receivables in view of impairment due to COVID19 

• Be able to reduce and avoid high risk customers- Risk identification and management 

• Able to present receivables appropriately in the financial statements and make right disclosures (IFRS 7?Financial Instruments: Disclosures). 

Course Objectives

By attending this ICL training course, delegates will be able to: 

• Identify the reasons for replacing IAS 39 with IFRS 9 and Learn the requirements of IFRS 9 Financial Instruments 

• Evaluate the key changes in accounting for financial instruments 

• Get an insight into classification of financial assets and financial liabilities under IFRS 9 

• Understand the new approach to impairment assessment of financial assets 

• Understand the financial reporting implications of the COVID-19 pandemic 

• Provide for appropriate adjustments and impairments for non-financial assets 

• Update provision models to reflect increased credit losses arising from COVID-19 

• Make appropriate provisions for the late or non-payment of debt and revaluation of financial assets 

• Understand the repercussions of other key issues including going concern and post balance sheet events.

Who is this Training Course for?

IFRS and management reporting professionals, accountants, Collections Team Leaders & Supervisors, Accounts Receivable and Payables Accountants, Commercial Managers, Economists, Financiers and Senior and Middle Managers and all those interested in having a better understanding of this standard. 

The Course Content

Day 1 

Session 1 - Introduction 

• What is IFRS 9? How does it differ from IAS -39? 

• What are financial assets and financial liabilities? 

• IFRS 9 history and implementation overview. 

Session 2 – Financial Assets Classification & Measurement 

• Presentation of the three different categories 

• Amortised Costs; 

• Fair value through Profit & Loss (FVTPL); 

• Fair value through Other Comprehensive Income (FVTOCI) 

• Accounting treatment determined by (i) business model (ii) nature of cash flows 

• Decision tree to decide on classification of financial instruments 

• Reminder on determining fair value 

• Level 1 based on unadjusted quoted price 

• Level 2 based on quoted price in inactive markets or observable model input. 

• Level 3 based on unobservable but significant inputs to the overall value 

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Case Study #1: participants will be presented with a few financial instruments and will classify them in their relevant categories 

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Session 3 – Financial Assets Impairments 

• Applies to amortized cost and FVTOCI mandatory fixed income instruments 

• Incurred losses (IAS 39) has been replaced by expected losses (IFRS 9) 

• Three stages process to determine impairments 

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Stage 1: “12-month expected credit losses” with effective interest rate on gross on gross carrying amount. 

Stage 2: “life-time expected credit losses” with effective interest rate on gross on gross carrying amount. 

Stage 3: “life-time expected credit losses” with effective interest rate on gross on amortised costs 

• Accounting treatment for financial instruments already impaired when acquired 

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Case Study #3: participants will assess the credit deterioration of financial assets during the COVID- 19 Pandemic. 

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Day 2 

Session 4 – Financial Liabilities & Own Credit 

• Financial liabilities at amortised cost or FVTPL 

• Own credit deterioration reduces institutions’ liabilities 

• Liability reduction due to COVID-19 to be now classified in OCI 

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Case Study #4: participants will assess the impact of COVID-19 on institutions’ own financial liabilities 

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Session 5: Financial Reporting and Disclosure requirements 

• Understand IFRS 9 for financial reporting 

• How are expected credit losses on trade receivables impacted? 

• ECLs on trade receivables are measured by applying either the general model or the simplified model. 

• Applying the ‘simplified approach’ to, trade receivables 

• Look at those matrices will have to be adjusted to incorporate reasonable and supportable information that is available at the reporting date, including the impact of the COVID-19 coronavirus outbreak. This will include discussion of additional scenarios and the impact of any government support schemes. 

• Renegotiations of trade receivables given the economic impacts of the COVID-19 outbreak and the need for discounting trade receivables 

• Discuss examples of specific disclosures that may be required in the Annual Financial Statements 

• Look at actions that management must take immediately 

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Case Study #5: participants will classify a few transactions in their relevant categories