AASB 9 Financial Instruments replaced the legacy AASB 139 Financial Instruments: Recognition and Measurement effective for years ended 30 June 2019.

This new standard resulted in significant changes for most entities reporting under Australian accounting standards, particularly:

  • the method of calculation of allowances for doubtful debts
  • presentation, recognition and measurement of financial instruments, generally.

The adoption of AASB 9 resulted in the adoption of the “Expected Credit Losses” model of provisioning — requiring preparers to consider the potential for future losses based on available information rather than allowing for impairment as-and-when actual losses were identified. As a result, complexity has also increased on common topics, particularly accounting for related-party loans.

Certain reliefs were provided related to certain relatively uncommon topics, including hedge accounting, allowing for the simpler designation of hedging pools and reductions in on-going compliance requirements.

Financial instruments remain a highly complex topic — the accounting standard extends over 100 pages and it often feels like it leaves more questions than answers. Individual contracts may contain one to all of the following:

  • Call & put options
  • Foreign currency exchanges
  • Fixed debt-to-equity conversion features
  • Variable debt-to-equity conversion features
  • Variable interest payments
  • Variable principal amounts
  • Both debt and equity features

How we help

  • Provide you with technical accounting advice on instruments
  • Assist with valuation for instruments with multiple elements
  • Prepare work papers, including establishment of models to assist with determination of expected credit losses
Merilyn Gwan
Partner & Head of National Assurance Quality
Merilyn Gwan

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