Academic journal article Journal of Accountancy

The International Accounting Standards Board (IASB) Issued a New Standard on the Classification and Measurement of Financial Assets

Academic journal article Journal of Accountancy

The International Accounting Standards Board (IASB) Issued a New Standard on the Classification and Measurement of Financial Assets

Article excerpt

The International Accounting Standards Board (IASB) issued a new standard on the classification and measurement of financial assets. Publication of the standard represents completion of the first part of a three-part project to replace IAS 39, Financial Instruments: Recognition and Measurement, with a new standard, IFRS 9, Financial Instruments.

IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the various rules in IAS 39. The approach in IFRS 9 is based on the reporting entity's business model and the contractual cash flow characteristics of the financial assets. The new standard also requires companies to use a single impairment method rather than allowing the many methods in IAS 39. As a result, the IASB says IFRS 9 will improve comparability and make financial statements easier to understand for investors and other users.

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Citing numerous outreach activities to stakeholders, the IASB says it has received broad support for its approach. At the same time, the standard setter points out that a number of changes were made to the exposure draft issued in July to accommodate stakeholder concerns. For example, the IASB changed the accounting that was proposed for structured credit-linked investments and for purchases of distressed debt. …

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