IFRS 9 Explained
What changed from IAS 39, on one page.
📅 Effective Date
January 1, 2018.
IAS 39 (Recognition and Measurement)
IFRIC 9 (Embedded Derivatives)
Classification by business model and cash flows
Expected credit loss (ECL)
Predecessor Standard
Big Changes
🔍 Scope: What is Covered?
IFRS 9 applies to financial assets and financial liabilities of all entities. In practice that means:
Receivables: Trade receivables and contract assets, including their impairment.
Investments and loans: Debt instruments, bank loans and investments in equity instruments.
Derivatives: Standalone derivatives and, where they apply, hedge accounting.
🚫 Scope Exclusions: What is Out of Scope?
Some instruments are covered by other standards instead:
Group interests: Subsidiaries, associates and joint ventures (IFRS 10, IAS 27, IAS 28).
Leases: IFRS 16, except impairment and derecognition of lease receivables.
Employee benefits: Rights and obligations under IAS 19.
Own equity: The entity’s own equity instruments (IAS 32).
Insurance contracts: Covered by IFRS 17, with limited exceptions.
Share-based payments: Covered by IFRS 2.
Classification and Impairment
How assets are measured, and how credit losses are booked.
📂 Classifying Financial Assets
Amortised cost: Held to collect; cash flows are solely principal and interest (SPPI).
FVOCI: Debt held to collect and sell (SPPI), or equity by election.
FVTPL: Everything else, including derivatives.
⚠️ Expected Credit Loss (ECL)
Stage 1: 12-month ECL for performing assets.
Stage 2: Lifetime ECL once credit risk has increased significantly.
Stage 3: Lifetime ECL for credit-impaired assets, with interest on the net carrying amount.
Simplified approach: Lifetime ECL from day one for trade receivables, usually through a provision matrix.