Amendments to
IFRS 9
IFRS 7 and IFRS 9 Amendments
Amendments to IFRS 9 and IFRS 7, effective date of transition
On 30 May 2024, the IASB published amendments to IFRS 9 that address the following topics:
derecognition of financial liability settled through electronic transfer
classification of financial assets:
contractual terms that are consistent with a basic lending arrangement;
financial assets with non-recourse features;
Contractually linked instruments.
The IASB also published the following amendments to IFRS 7 Disclosures:
Investments in equity instruments designated at fair value through other comprehensive income;
Contractual terms that could change the timing or amount of contractual cash flows on the occurrence (or non-occurrence) of a
contingent event.
The amendments are effective for annual reporting periods beginning on or after 1 January 2026 with earlier application permitted. An
entity is required to apply the amendments retrospectively, in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates
and Errors, unless specified otherwise. An entity is not required to restate prior periods.
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IFRS 9 Amendments
Derecognition requirements of a financial liability settled through electronic transfer
The application guidance in IFRS 9 is amended to clarify the date of initial recognition or derecognition of financial assets and financial liabilities.
The existing application guidance states that a financial liability is derecognized at its settlement date, being the date on which the liability
is extinguished because the obligation specified in the contract is discharged, cancelled, expires, or the liability otherwise qualifies for
derecognition.
Alternative treatment: the amendments permit an entity to deem a financial liability (or part of it) that will be settled in cash using an electronic
payment system to be discharged before the settlement date if, and only if, the entity has initiated a payment instruction that has resulted in:
the entity having no practical ability to withdraw, stop or cancel the payment instruction
the entity having no practical ability to access the cash to be used for settlement as a result of the payment instruction
the settlement risk associated with the electronic payment system being insignificant.
Settlement risk associated with an electronic payment system is insignificant if
its characteristics are such that completion of the payment instruction follows a standard administrative process and the time between the first
two criteria above being met, and the cash being delivered to the counterparty is short.
Settlement risk is not insignificant if completion of the payment instruction is subject to the entity’s ability to deliver cash on the settlement date.
An entity that elects to apply the derecognition exemption for financial liabilities is required to apply it to all settlements made through the
same electronic payment system.
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IFRS 9 Amendments
Derecognition requirements of a financial liability settled through electronic transfer
The amendments address the specific scenario of payments made using an electronic payment system for financial liabilities. They do not apply
to any other means of paying financial liabilities, such as payments by cheque.
Therefore, “paying” by writing a cheque does NOT qualify for derecognition of the liability as such, but simply turns the trade liability into another
form of liability (the one resulting from the uncashed cheque). Only, if the bank pays out the cheque and the money leaves the bank-account
can the liability be treated as settled.
For other forms of payment not meeting the requirements of the “electronic payment system exemption”, the liability might still have to be shown
together with “cash in transit” and some form of reporting or monitoring-system might have to be established so that accounting is informed, at
which point in time the liability has effectively been settled (because the counterparty has effectively got his/her money)
Entities must review the electronic payment systems they use to understand when in the payment process the conditions for derecognition are met
and whether to apply the accounting policy election. This may require significant work for entities operating in multiple jurisdictions with cross-
border payments.
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IFRS 9 Amendments
Derecognition requirements of a financial liability settled through electronic transfer
Some practical difficulties observed
Impact of amendments on current
practices
Scope of the exemption (excluding exemption)
- No definition of an electronic payment
- For cheques to be cashed, it is difficult to
system
determine the settlement date. The current
- The application of the exemption is practice is to derecognise as soon as
unclear in the case of several payment payment by cheque is initiated (even before
systems used to settle a single cashing it)
transaction Impacts on the cash in
- The application of the exemption for Operational difficulties transit (in case the
each payment system may increase
- The criterion of inability to cancel or exemption is not applied)
the diversity of practice
stop the payment instruction will - Clarification of the classification
require complex legal analyses by of the cash in transit as
jurisdiction “restricted cash”
- Need to identify all electronic payment - Question about the presentation
systems used by groups of cash in transit as cash
equivalents
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Practical application – card payments
Fact pattern:
From the merchant’s perspective:
• A customer (cardholder) uses their credit
card to purchase an item from a • The merchant cannot recognise cash at the time of sale, as
department store (merchant). the card payment process takes 3 days to cash settle.
• Assume when the customer makes the • The merchant should therefore recognise a receivable (from
credit card payment, a series of messages the issuing bank).
are passed between the following parties to • The merchant only recognises cash once the transaction is
facilitate payment: settled between the issuing and acquiring banks.
- the merchant’s bank (‘acquiring bank’),
- the payment network, and
- customer’s credit card issuer (‘issuing
bank’).
- Assume the transaction takes 3 days to
cash settle between the banks.
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IFRS 9 Amendments
Financial assets with ESG-linked features
Do the contractual cash flows, both before and after the
contingent event, meet SPPI?
Yes
Is the nature of the contingent event related directly to a
No change in basic lending risks or costs?
No Yes
Are the contractual cash flows not significantly different from
those of an identical financial asset without the contingency
in all contractually possible scenarios?
Not SPPI SPPI
Significantly Not significantly
different different
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Scenario: Amendments Does such instrument meet the SPPI
to SPPI (1) criteria?
The bank issues a loan to a customer, the
interest rate on which is adjusted by a fixed
number of basis points if the debtor achieves the
contractual greenhouse gas emission reductions
during the previous reporting period.
1) Yes 2) No
The bank estimates that the maximum possible
adjustments in the aggregate do not lead to a
significant change in the interest rate on the
loan.
3) Accounting policy
choice
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Scenario: Amendments Does such instrument meet the SPPI
to SPPI (1) criteria?
The bank issues a loan to a customer, the
interest rate on which is adjusted by a fixed
number of basis points if the debtor achieves the
contractual greenhouse gas emission reductions
during the previous reporting period.
1) Yes 2) No
The bank estimates that the maximum possible
adjustments in the aggregate do not lead to a
significant change in the interest rate on the
loan.
3) Accounting policy
choice
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SPPI amendments – changes in contractual cash flows
Description Key rationale
Instrument EA Instrument meets SPPI:
• A loan with an interest rate that is • Cash flows after the contingency are SPPI – because the interest rate is adjusted by
adjusted annually by a fixed number of a fixed number of basis points.
basis points if the debtor achieves a • However, the nature of the contingent even is not related directly to changes in basic
contractually specified reduction in GHG lending risk and costs, therefore the new test must apply.
emissions during the preceding reporting • Because any adjustments over the life of the instrument would not result in
period. contractual cash flows that are significantly different, the entity concludes that the
• The maximum possible cumulative loan has contractual cash flows that are solely payments of principal and interest on the
adjustments would not significantly principal amount outstanding.
change the interest rate on the loan.
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Scenario: Amendments Does such instrument meet the SPPI
to SPPI (2) criteria?
The bank issues a loan to the client, the interest
rate on which is adjusted each reporting period
to track the movements in a market-determined
carbon price index during the preceding
reporting period.
1) Yes 2) No
3) Accounting policy
choice
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Scenario: Amendments Does such instrument meet the SPPI
to SPPI (2) criteria?
Correct answer:
2) No
Contractual cash flows are indexed to a variable
(the emissions price index) that is not related to 1) Yes 2) No
the underlying credit risks or costs.
3) Accounting policy
choice
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