IFRS 9 Financial Instruments

The effects are far-reaching and the need for adjustment is considerable; early preparation for the new regulations is advisable. Companies that have not yet familiarised themselves with the new IFRS 9 standard have little time for an extensive and intensive transition phase.

On 24 July 2014, the IASB published the final IFRS 9 Financial Instruments standard, which replaces IAS 39. The new standard includes amended requirements for the classification and measurement of financial assets as well as a new risk provisioning model that now takes expected losses into account when calculating risk provisions. In addition, the new regulations on hedge accounting published in November 2013 were incorporated into the final IFRS 9 standard.

Standard valid for financial years from 1 January 2018

After the result of the EU endorsement process by the EU Commission of the IFRS 9 regulations was expected earlier, the EU published the new regulations in the Official Journal on 22 November 2016. Since then, the standard has been effective for financial years beginning on or after 1 January 2018. Earlier application is permitted.

For the insurance industry, the Commission is in favour of an optional temporary deferral of the effective date of IFRS 9 in order to ensure simultaneous application with IFRS 17. With regard to the correspondingly amended IFRS 4, the EU Commission has asked EFRAG for a recommendation on endorsement.

Standard is based more on principles and less on individual specifications

Compared to IAS 39, the new IFRS 9 standard is based more on principles and less on individual requirements. As a result, many questions of interpretation arise for users, for which a standardised approach is currently being developed in accounting practice.

In addition, the standard requires considerable adjustments: in addition to pure accounting and disclosure, product characteristics (e.g. loan agreements), processes, organisational structures, IT systems and data requirements are particularly affected.

Due to the scope and the far-reaching effects on business processes, it is high time to get to grips with the new IFRS 9 standard - contact us.

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Our services

The implementation of IFRS 9 regulations requires a cross-divisional approach, methodological and procedural experience, which our team has already gained in national and international companies in the implementation of IFRS 9 projects.

KPMG's specialists have a deep and comprehensive understanding of financial instruments. This includes their mapping under different accounting standards and in regulatory law. They also have a comprehensive understanding of risk management methods and processes and their implications for reporting. In addition, they have extensive benchmark expertise for hedge accounting models and extensive experience in the implementation of accounting systems.

With our holistic view of your value chain, we help you to utilise potential efficiencies through closer networking of front office, accounting, reporting and controlling. With the help of our analysis tools, we show you the company-specific effects in strategic and operational dimensions. This includes the impact on strategy and business models as well as their management and the influence on the external presentation in the consolidated financial statements and annual report. We also identify the drivers of complexity, the impact on internal processes and the IT systems used.

Simulation calculations

We provide you with our simulation tools to estimate the quantitative impact of the new regulations on the balance sheet and income statement as well as on regulatory capital. The various simulation options serve as a basis for decisions on positioning, the interpretation of room for manoeuvre and the exercise of options.

With the help of our "IFRS 9 Impairment Simulation Tool", we can determine future risk provisions and their development over time on the basis of your business and credit risk data (PD and LGD). The dynamic development of your lending business can be taken into account. In addition, stress scenarios can be modelled with regard to the probability of default in order to estimate the impact of changed credit risk framework conditions.

Categorisation of financial instruments already in the portfolio

To this end, we provide you with our tried-and-tested tools to minimise individual case reviews and thus reduce the time and resources required to a minimum.

Our "iRadar" analysis tool for securities replicates the decision algorithms of IFRS 9 and helps you to carry out and document an audit-proof analysis. In addition to the initial analysis, we offer you the tool-supported option of verifying the categorisation in your securities portfolios on an ongoing basis.

For loans on the assets side, we carry out a portfolio screening to cluster and reduce individual case decisions. The remaining loans can then be analysed individually in our "Lending Tool" with regard to product characteristics.

Technical conception and realisation in processes and IT functionalities

We offer you support in analysing the necessary steps for implementing the new IFRS regulations. The first step is to analyse the expected requirements in terms of their impact on your company. Which requirements only require minor changes to ensure future IFRS 9 compliance? Which requirements require significant methodological or procedural changes or are procedurally dependent on other areas?

Based on our extensive benchmark expertise, we can analyse your adaptation requirements promptly and with a short lead time and identify alternative courses of action. The aim of the interpretation of the standard is to ensure efficient implementation. We meet the expected stronger focus on risk management in the future by including all relevant areas of the company as well as procedural and IT-related aspects.

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