IFRS 9 Financial Instruments

1 International Financial Reporting Standard November 2013 Hedge Accounting and amendments to ifrs 9, ifrs 7 and IAS 39 ifrs 9 Financial InstrumentsIFRS9 Financial Instruments (HedgeAccountingandamendments toIFRS9,IFRS7andIAS39) ifrs 9 Financial Instruments (Hedge Accounting and amendments to ifrs 9, ifrs 7 and IAS 39)is published by the International Accounting Standards Board (IASB).Disclaimer:the IASB, the ifrs Foundation, the authors and the publishers do not acceptresponsibility for any loss caused by acting or refraining from acting in reliance on thematerial in this publication, whether such loss is caused by negligence or Financial Reporting Standards (including International Accounting Standardsand SIC and IFRIC Interpretations), Exposure Drafts and other IASB and/or ifrs Foundationpublications are copyright of the ifrs 2013 ifrs Foundation ISBN for this part: 978-1-909704-14-5.

2 ISBN for the set of three parts: 978-1-909704-13-8 All rights part of this publication may be translated, reprinted, reproducedor used in any form either in whole or in part or by any electronic, mechanical or othermeans, now known or hereafter invented, including photocopying and recording, or in anyinformation storage and retrieval system, without prior permission in writing from theIFRS approved text of International Financial Reporting Standards and other IASB publications is that published by the IASB in the English language. Copies may be obtainedfrom the ifrs Foundation. Please address publications and copyright matters to: ifrs Foundation Publications Department30 Cannon Street, London EC4M 6XH, United KingdomTel: +44 (0)20 7332 2730 Fax: +44 (0)20 7332 2749 Email: Web: ifrs Foundation logo/the IASB logo/the ifrs for SMEs logo/ Hexagon Device , IFRSF oundation , eIFRS , IASB , ifrs for SMEs , IAS , IASs , IFRIC , ifrs , IFRSs , SIC , International Accounting Standards and International Financial Reporting Standards areTrade Marks of the ifrs ifrs Foundation is a not-for-profit corporation under the General Corporation Law ofthe State of Delaware, USA and operates in England and Wales as an overseas company(Company number.)

3 FC023235) with its principal office as Financial REPORTING STANDARD 9 Financial Instruments (HEDGE ACCOUNTING ANDAMENDMENTS TO ifrs 9, ifrs 7 AND IAS 39)CHAPTERS4 HEDGE EFFECTIVE DATE AND Defined termsB Application guidanceC Amendments to other IFRSsAPPROVAL BY THE BOARD OF ifrs 9 Financial Instruments (HEDGEACCOUNTING AND AMENDMENTS TO ifrs 9, ifrs 7 AND IAS 39) ISSUED INNOVEMBER 2013 BASIS FOR CONCLUSIONS (see separate booklet)APPENDIXA mendments to the Basis for Conclusions on other IFRSsDISSENTING OPINIONIMPLEMENTATION GUIDANCE (see separate booklet)APPENDIXA mendments to guidance on other IFRSs1 This publication only includes those paragraphs in this chapter that have been amended or arenecessary for ease of ifrs Foundation3 International Financial Reporting Standard 9 Financial Instruments ( ifrs 9) is set out inparagraphs and Appendices A C.

4 This publication amends particularparagraphs of ifrs 9 and adds Chapter 6. Paragraphs of ifrs 9 that are not included arenot amended by this publication. All the paragraphs have equal authority. Paragraphsinbold typestate the main principles. Terms defined in Appendix A are initalicsthefirst time they appear in the ifrs . Definitions of other terms are given in the Glossaryfor International Financial Reporting Standards. ifrs 9 should be read in the context ofits objective and the Basis for Conclusions, thePreface to International Financial ReportingStandardsand theConceptual Framework for Financial Reporting. IAS 8 Accounting Policies,Changes in Accounting Estimates and Errorsprovides a basis for selecting and applyingaccounting policies in the absence of explicit 9 FINANCIALINSTRUMENTS NOVEMBER2013 ifrs Foundation4 IntroductionThis publication amends some existing paragraphs of ifrs 9 and adds Chapter 6 HedgeAccounting.

5 It includes only those paragraphs that have been amended or arenecessary for ease of reference. No mark-up has been used; instead the amendedparagraphs are replaced in Introduction is amended and now reads as set out for issuing the IFRSIN1 IAS 39 Financial Instruments : Recognition and Measurementsets out the requirementsfor recognising and measuring Financial assets, Financial liabilities and somecontracts to buy or sell non- Financial items. The International AccountingStandards Board (IASB) inherited IAS 39 from its predecessor body, theInternational Accounting Standards users of Financial statements and other interested parties told the IASB that the requirements in IAS 39 were difficult to understand, apply andinterpret.

6 They urged the IASB to develop a new Standard for the financialreporting of Financial Instruments that was principle-based and less the IASB amended IAS 39 several times to clarify requirements, addguidance and eliminate internal inconsistencies, it had not previouslyundertaken a fundamental reconsideration of the reporting for 2005 the IASB and the US national standard-setter, the Financial AccountingStandards Board (FASB), began working towards a long-term objective to improveand simplify the reporting for Financial Instruments . This work resulted in thepublication of the Discussion Paper,Reducing Complexity in Reporting FinancialInstruments, in March 2008. Focusing on the measurement of financialinstruments and hedge accounting, the Discussion Paper identified severalpossible approaches for improving and simplifying the accounting for financialinstruments.

7 The responses to the Discussion Paper indicated support for asignificant change in the requirements for reporting Financial Instruments . InNovember 2008 the IASB added this project to its active agenda, and inDecember 2008 the FASB also added the project to its April 2009, in response to the feedback received on its work responding to thefinancial crisis, and following the conclusions of the G20 leaders and therecommendations of international bodies such as the Financial Stability Board,the IASB announced an accelerated timetable for replacing IAS 39. As a result, inJuly 2009 the IASB published the Exposure DraftFinancial Instruments : Classificationand Measurement, followed by the first chapter of ifrs 9 Financial InstrumentsinNovember ifrs Foundation5 The IASB s approach to replacing IAS 39IN5 The IASB intends that ifrs 9 will ultimately replace IAS 39 in its , in response to requests from interested parties that the accounting forfinancial Instruments should be improved quickly, the IASB divided its projectto replace IAS 39 into three main phases.

8 As the IASB completes each phase, itwill create chapters in ifrs 9 that will replace the corresponding requirementsin IAS three main phases of the IASB s project to replace IAS 39 are:(a)Phase 1: classification and measurement of Financial assets andfinancial November 2009 the IASB issued the chapters ofIFRS 9 relating to the classification and measurement of Financial October 2010 the IASB added to ifrs 9 the requirements related to theclassification and measurement of Financial liabilities. Those additionalrequirements are described further in paragraph IN7. In November 2011the IASB decided to consider limited modifications to the classificationand measurement requirements. The IASB published in November 2012the Exposure DraftClassification and Measurement: Limited Amendments toIFRS 9 (Proposed amendments to ifrs 9 (2010)).

9 (b)Phase 2: impairment June 2009 the IASB published aRequest for Information on the feasibility of an expected loss model forthe impairment of Financial assets. This formed the basis of theExposure DraftFinancial Instruments : Amortised Cost and Impairment,published in November 2009 and the supplement to the Exposure Draft, Financial Instruments : Impairment, published in January 2011. As the resultof considering the feedback received on those documents, the IASB published in March 2013 the Exposure DraftFinancial Instruments : ExpectedCredit Losses. The IASB is redeliberating the proposals in that ExposureDraft to address the comments received from respondents and thesuggestions received from other outreach activities.

10 (c)Phase 3: hedge November 2013 the IASB added toIFRS 9 the requirements related to hedge accounting. Those additionalrequirements are described further in paragraph October 2010 the IASB added to ifrs 9 the requirements for the classificationand measurement of Financial liabilities. Most of the requirements in IAS 39 forthe classification and measurement of Financial liabilities were carried forwardunchanged to ifrs 9. However, the requirements related to the fair value optionfor Financial liabilities were changed to address own credit risk. Thoseimprovements respond to consistent feedback from users of Financial statementsand others that the effects of changes in a liability s credit risk ought not toaffect profit or loss unless the liability is held for trading.