What is the purpose of IFRS 9?

What is the purpose of IFRS 9?

IFRS 9 specifies how an entity should classify and measure financial assets, financial liabilities, and some contracts to buy or sell non-financial items.

What are the main issues addressed by the amendments of IFRS 9?

Main issues addressed by the amendments to IFRS 9 The amendment means that entities will now be able to measure some prepayable financial assets with negative compensation at amortised cost. The amendments are effective for annual periods beginning on or after 1 January 2019, with earlier application permitted.

What is the interest rate benchmark reform?

Interest rate benchmark reform: Overnight risk-free rates and term rates. The FSB has recognised that in some cases there may be a role for risk-free rate-derived term rates. Deep and liquid derivative markets based on the overnight RFRs are an essential prerequisite for creation of robust term benchmarks.

What standards does IFRS 9 replace?

IFRS 9 replaces IAS 39, Financial Instruments – Recognition and Measurement. It is meant to respond to criticisms that IAS 39 is too complex, inconsistent with the way entities manage their businesses and risks, and defers the recognition of credit losses on loans and receivables until too late in the credit cycle.

What is benchmark interest?

A benchmark is the standard rate used widely for other for settling financial obligations. Interest rate benchmark means the rate that is used as a standard or base to pay interest rate for deposits and loans. MIBOR is loan interest rate; it is the rate at which a lender would like to charge.

What is an overnight risk-free rate?

Overnight Risk-Free Rate denotes any of a set of (nearly) risk-free references interest rates (RFR), which can be used as alternative benchmarks for the existing key interbank offered rates (IBORs) in the unsecured lending markets.

What are the advantages and disadvantages of converting to IFRS?

International Financial Reporting Standards – Advantages & Disadvantages

  • Advantage: Greater Comparability.
  • Disadvantage: Not Globally Accepted.
  • Advantage: More Flexibility.
  • Disadvantage: Standards Manipulation.
  • Disadvantage: Increased Costs.