Amendments to the classification and measurement requirements for financial instruments finalised

These amendments result from the review of the corresponding part of IFRS 9 Financial Instruments (Post-Implementation Review) carried out in 2022.

The amendments adopted include a clarification of the classification of financial assets that are linked to environmental, social and governance (ESG) and similar characteristics. Stakeholders discussed the extent to which such ESG characteristics in financial instruments affect subsequent accounting, i.e. accounting at amortised cost or fair value. Subsequent accounting depends on the cash flow characteristics of the financial asset. With the amendments, the IASB wants to clarify how the contractual cash flows of corresponding instruments are to be assessed in this context.

The amendment also addresses the settlement of liabilities through electronic payment systems. The discussion centred on problems with the application of the derecognition provisions in IFRS 9 with regard to financial assets and financial liabilities in the case of electronic money transfers. On the one hand, the amendments clarify the point in time at which a financial asset or financial liability is derecognised. In addition, an option is introduced that allows a company to derecognise a financial liability before it delivers cash on the settlement date, provided certain criteria are met.

With the amendments, the IASB has also introduced additional disclosure requirements with regard to investments in equity instruments measured at fair value through other comprehensive income and financial instruments with contingent features (e.g. ESG objectives).

The amendments are to be applied to financial years beginning on or after 1 January 2026. According to the IASB, early application of the amendments is permitted. However, application in the EU generally requires an EU endorsement.

The press release is available on the IASB website at this link.