This IFRS 9 course can also be presented face to face in-house or in-house via live webinar.
IFRS 9 Course Objectives:
- Be introduced to the IFRS 9 and how it differs from IAS 39
- Get an overview of financial asset classification and measurement.
- Have explained to them financial assets impairments
- Gain an understanding of financial liabilities and credit
- Learn about hedge accounting including its different types
IFRS 9 Course Content:
Session 1 – Introduction
- What is IFRS 9? How does it differ from IAS 39?
- What are financial assets and financial liabilities?
- IFRS 9 history and implementation overview
Session 2 – Financial Assets Classification & Measurement
- Presentation of the three different categories
- Amortised Costs;
- Fair value through Profit & Loss (FVTPL);
- Fair value through Other Comprehensive Income (FVTOCI)
- Accounting treatment determined by (i) business model (ii) nature of cash flows
- Decision tree to decide on classification of financial instruments
- Balance sheet and P&L calculation of a bond at amortized cost
- Based on the Internal Rate of Return (IRR) of future cash flows
- Treatment of fees in the IRR calculation
- Balance sheet and P&L calculation of a bond at FVTPL and FVTOCI
- Effective interest rate method for interests (same as amortised costs)
- Unrealised gain based on NPV at current yield of future cash flows
- Reminder on determining fair value
- Level 1 based on unadjusted quoted price
- Level 2 based on quoted price in inactive markets or observable model input
- Level 3 based on unobservable but significant inputs to the overall value
Case Study #1: participants will be presented with a few financial instruments and will classify them in their relevant categories
Case Study #2: participants will compute on Excel the impact on balance and P&L for different types of debt & equity instruments
Session 3 – Financial Assets Impairments
- Applies to amortized cost and FVTOCI portfolios
- Incurred losses (IAS 39) has been replaced by expected losses (IFRS 9)
- “12-month expected credit losses” vs. “life-time expected credit losses”
- Three stages process to determine impairments
- Interest income based on gross carrying amount or amortised costs
- Accounting treatment for financial instruments already impaired when acquired
Case Study #3: participants will assess a credit deterioration on a financial instrument and book an impairment based its expected future losses
Session 4 – Financial Liabilities & Own Credit
- Financial liabilities at amortised cost or FVTPL
- Own credit deterioration reduces institutions’ liabilities
- Liability reduction due to rating downgrade to be now classified in OCI
Case Study #4: participants will assess the impact on credit deterioration on institutions’ own bonds
Session 5 – Hedge Accounting
- Qualification for hedge accounting
- IFRS 9 hedge accounting more closely aligned to risk management policy
- Elimination of distinction between financial and non-financial components of hedging
- Different types of hedge accounting
- Cash flow hedge and its impact on OCI
- Fair value hedge impact depending on underlying exposure
- Net investment hedge for foreign subsidiary
Case Study #5: participants will classify a few hedging transactions in their relevant categories
Case Study #6: participants will value an interest rate swap accounted for as a cash flow hedge
Case Study #7: participants will review and assess different hedge scenarios including risk component hedging, aggregate exposures and net position
Background of the trainer:
The trainer has 15 years of experience in accounting and investment banking at leading firms and is an experienced financial trainer who has delivered courses for financial institutions in the City of London and around the world, in the areas of Corporate Finance, Valuation (Industrials and Banks), Financial Modelling, M&A, LBO, Financial Accounting, Capital Markets, Bank Regulatory Capital, Financial Risks, both in English and French.
IFRS 9 Course Summary:
International Financial Reporting Standard 9 (“IFRS 9”) is the accounting standard for financial instruments, which defines the classification, measurements and impairment of financial instruments. It is designed to make annual reports more meaningful to investors as well as simplify how auditors implement the rules and introduce safeguards to limit credit losses.
In July 2014, after several years of delay, the accounting regulators published the final text of IFRS 9. This combines revised versions of previously published sections with the first publication of the final and most controversial impairment section.
IFRS 9 will become effective in 2018 but is already widely reported in annual accounts of financial institutions and corporate worldwide.
Through a mix of lecture and case studies, the workshop will equip participants to achieve a detailed understanding of the latest IFRS 9 standard, both for financial assets, liabilities and derivatives, including:
- The classification and measurement of financial instruments;
- The new impairment methodology based on expected losses;
- The fair value of financial liabilities and deterioration of institutions’ own credit;
- The different types of hedge accounting and the recent IFRS changes.
Participants will be required to bring a laptop to the course with that model loaded.
What Redcliffe’s clients are saying about the course:
“The trainer was knowledgeable and covered very relevant and salient points.”
Finance Control, Erste Group Bank AG
“The trainer’s presentation style and illustrative examples was fantastic.”