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Technical Resources
This webpage contains pronouncements, guides and articles that are relevant to
HKFRS 9 Financial Instruments.
Effective Date
Financial periods beginning on or after 1 January 2018.
Affected standards
Supersedes HKAS 39 Financial Instruments: Recognition and Measurement.
Why do we need a new standard
HKFRS/IFRS 9 was developed to make financial reporting for financial instruments more relevant and understandable. The reforms introduced by HKFRS 9 are consistent with requests from the G20, the Financial Stability Board and Others.
HKFRS 9 brings together the classification and measurement,impairment and hedge accounting phases of the IASB’s project to replace HKAS 39 Financial Instruments: Recognition and Measurement.
HKFRS 9 is built on a logical, single classification and measurement approach for financial assets that reflects the business model in which they are managed and their cash flow characteristics.
Built upon this is a forward-looking expected credit loss model that will result in more timely recognition of loan losses and is a single model that is applicable to all financial instruments subject to impairment accounting.
In addition, HKFRS 9 addresses the so-called ‘own credit’ issue, whereby banks and others book gains through profit or loss as a result of the value of their own debt falling
due to a decrease in credit worthiness when they have elected to measure that debt at fair value.
HKFRS 9 also includes an improved hedge accounting model to better link the economics of risk management with its accounting treatment.
Recent development
(a) Classification and measurement requirements
The International Accounting Standards Board (IASB) issued the completed version of IFRS 9 in 2014 and the standard has been effective since 2018. To help the IASB assess the effects of a new Standard after it has been effective for some time, the IASB started carrying out the Post-implementation Review (PIR) of IFRS 9 in 2021 and issued the first Request for Information (RFI) on the classification and measurement requirements in September 2021. The RFI seeks feedback on applying the classification and measurement requirements of IFRS 9 and related disclosures. The Hong Kong Institute of Certified Public Accountants (Institute) conducted various forms of outreach activities to solicit feedback from local stakeholders. In January 2022, the Institute submitted its comment letter to the IASB.
The IASB completed its PIR of the classification and measurement requirements in IFRS 9 and published the project report and feedback statement in December 2022. Feedback from stakeholders and research undertaken as part of the PIR show that the requirements set out in IFRS 9 are working as intended and provide useful information to the users of financial statements. In response to feedback on this PIR, the IASB initiated a standard-setting project to make narrow-scope amendments to IFRS 9 and an Exposure Draft Amendments to the Classification and Measurement of Financial Instruments (ED) was published in March 2023. The Institute submitted its comment letter to the IASB on the ED in July 2023. Additionally, the IASB has decided to add a project on Amortised Cost Measurement to its research pipeline
After several rounds of deliberation, the IASB published the final amendments in May 2024. The key areas of the amendments include:
- clarifying the classification of financial assets with environmental, social and corporate governance (ESG) and other similar features;
- clarifying the date on which a financial asset or financial liability is derecognised;
- introducing an accounting policy option to derecognise financial liabilities that are settled through an electronic payment system before settlement date if specified criteria are met;
- clarifying the requirements for classifying financial assets with non-recourse features and contractually linked instruments; and
- additional disclosure requirements regarding investments in equity instruments designated at fair value through other comprehensive income and financial instruments with contingent features, for example, features tied to ESG-linked targets.
In August 2024, the HKICPA issued the equivalent amendments after undergoing the Institute’s standard-setting due process for full convergence of HKFRS with IFRS Accounting Standards. The amendments will become effective for annual reporting periods beginning on or after 1 January 2026. Earlier application of either all the amendments at the same time or only the amendments related to the classification of financial assets is permitted.
(b) Impairment requirements
In May 2023, the IASB issued the second RFI focusing on specific areas of the impairment requirements of IFRS 9 and related disclosures. The Institute conducted various forms of outreach activities to solicit feedback from local stakeholders. In September 2023, the Institute submitted its comment letters to the IASB. The submission and the comment letters received are available at the Institute’s website.
The IASB completed its PIR of the impairment requirements in IFRS 9 and published the project summary and feedback statement in July 2024. After analysing the evidence gathered in this PIR, the IASB concluded that the impairment requirements are working as intended.
In response to stakeholder feedback, the IASB decided:
- to classify as medium priority the matters relating to credit risk disclosures. The IASB will add a project to its research pipeline to make targeted improvements to specific disclosure requirements in IFRS 7 Financial Instruments: Disclosures;
- to classify as low priority the matters relating to financial guarantee contracts and to consider these matters during the next agenda consultation;
- to take no additional action on the matters relating to the interaction between the impairment requirements and the IFRS 9 requirements for modification, derecognition and write-off of financial assets, as these matters will be considered as part of its research pipeline project Amortised Cost Measurement; and
- to take no further action on other matters identified in this PIR.
Upcoming activities
The IASB has added the PIR of IFRS 9 Financial Instruments—Hedge Accounting to its research pipeline. The IASB will consider when to begin the PIR after it concludes its work on Power Purchase Agreements.
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