PIR IFRS 9 - Financial Instruments - Classification and Measurement

​During June-July 2021 EFRAG TEG discussed the selection of key issues, their description and whether standard setting is considered to resolve these issues.

On 9 June 2021, the EFRAG Board decided that the future EFRAG response to the Request for Information (RFI) on IFRS 9 Financial Instruments should include views about the technical merits of the key issues reported. The remaining issues are to be reported to the IASB without an accompanying assessment.

The EFRAG Board further decided that the technical assessment should be focused on providing indications as to whether standard setting is considered necessary to solve the issue, without providing indications of the possible standard setting solution itself.

During February-March 2021, the EFRAG Secretariat consulted EFRAG working groups and had an exchange with the IFRS 9 Task Force of Accountancy Europe. This has allowed to prepare a first comprehensive list of issues that have been reported to the IASB Staff, including at the ASAF meeting in March 2021.

The IASB decided to launch the Post Implementation Review of IFRS 9 Financial Instruments on 28 September 2020. The Review is limited to the classification and measurement principles of the Standard.

EFRAG published a draft comment letter on the proposals on 8 November 2021. In the draft comment letter, EFRAG noted several issues that are prevalent in Europe and might deserve standard-setting activities. Those with highest priorities are the application of the SPPI-test to sustainable finance products, the absence of recyclng for FVOCI equity instruments, the treatment of equity-type instruments and reporting on reverse factoring.

EFRAG received 13 comment letters and several draft letters to the DCL and held additional outreach during the consultation period.

EFRAG published its final comment letter on 28 January 2022. In its final comment letter EFRAG noted that the cash flow characteristics of the assets together with the assessment of the business model has proved to generally provide an appropriate basis to align the measurement of financial instruments with how they are managed by the entity. In addition, EFRAG asked the IASB to consider whether the classification and measurement guidance in IFRS 9 adequately caters for recent market developments such as ESG features and the use of administrative rates. 

EFRAG has been informed that the effective interest method generally provides useful information but for some financial instruments application challenges exist.

For more details, please refer to EFRAG's final comment letter, which can be found here.