The IFRS foundation has issued a reminder about two new financial reporting standards, IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers, which companies will have to apply for reporting periods beginning on or after 1 January 2018.
· IFRS 9: this will replace IAS 39 Financial Instruments and bring together the following aspects of accounting for financial instruments:
o classification and measurement;
o impairment; and
o hedge accounting.
In practice, the most significant change will be in the way financial institutions account for loan losses. IFRS 9 replaces the incurred loan loss model of IAS 39 with an expected loan loss model. The new model is likely to result in greater loan loss provisions by financial institutions and will provide investors with useful information on changes in credit risk exposure.
· IFRS 15: this will replace IAS 18 Revenue and IAS 11 Construction Contracts. It will establish a comprehensive framework for determining when to recognise revenue and how much revenue to recognise. It is expected to increase comparability among companies across sectors and markets. IFRS 15 will affect almost all companies because it covers revenue from all contracts with customers, except for revenue from leases, financial instruments and insurance contracts.
The IFRS foundation has issued a reminder about two new financial reporting standards, IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers, which companies will have to apply for reporting periods beginning on or after 1 January 2018.
· IFRS 9: this will replace IAS 39 Financial Instruments and bring together the following aspects of accounting for financial instruments:
o classification and measurement;
o impairment; and
o hedge accounting.
In practice, the most significant change will be in the way financial institutions account for loan losses. IFRS 9 replaces the incurred loan loss model of IAS 39 with an expected loan loss model. The new model is likely to result in greater loan loss provisions by financial institutions and will provide investors with useful information on changes in credit risk exposure.
· IFRS 15: this will replace IAS 18 Revenue and IAS 11 Construction Contracts. It will establish a comprehensive framework for determining when to recognise revenue and how much revenue to recognise. It is expected to increase comparability among companies across sectors and markets. IFRS 15 will affect almost all companies because it covers revenue from all contracts with customers, except for revenue from leases, financial instruments and insurance contracts.
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