IFRS 9 Financial Instruments
How to classify financial assets, at what value to measure them and how to provide for expected credit losses
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IFRS 9 sets out how an entity classifies and measures financial assets, financial liabilities and certain contracts to buy or sell non-financial items. The standard applies to annual periods beginning on or after 1 January 2018 and replaced IAS 39.
In Uzbekistan, IFRS is mandatory for public interest entities — from 1 January of the year following their inclusion in the Register (Presidential Resolution PP-282) — and for entities that have adopted it voluntarily. For them, IFRS 9 is one of the areas with the largest adjustments: receivables, loans, deposits, investments.
Recognition and initial measurement
A financial asset or liability is recognised when the entity becomes a party to the contract. On initial recognition it is measured at fair value; for instruments not measured at fair value through profit or loss — including directly attributable transaction costs.
Three categories of financial assets
Classification depends on the business model for managing the asset and the characteristics of its contractual cash flows:
- Amortised cost — the asset is held to collect contractual cash flows, and those cash flows are solely payments of principal and interest (typically: trade receivables, loans granted).
- Fair value through other comprehensive income — the business model involves both collecting cash flows and selling the assets.
- Fair value through profit or loss — all other assets.
- Reclassification — only when the business model changes, and for all affected assets.
Expected credit losses
The impairment requirements in IFRS 9 are based on expected credit losses on financial assets and loan commitments. The allowance is created not after a default occurs but in advance — taking into account the probability of default. In practice, for trade receivables this is a provision matrix by ageing of overdue balances.
What this means for a company in Uzbekistan
- Receivables allowances under national accounting standards (NAS) and under IFRS 9 usually differ — this is one of the main adjustments in a conversion.
- Interest-free loans to shareholders and related parties require discounting.
- An accounting policy on classification and a methodology for calculating expected credit losses are needed.
We will calculate your IFRS 9 adjustments
We will classify your financial assets and calculate the expected credit loss allowance for IFRS financial statements.
Go to the IFRS Audit and Conversion serviceFrequently asked questions
What does IFRS 9 govern?
Classification and measurement of financial assets and liabilities, impairment under the expected credit loss model, and hedge accounting.
What categories of financial assets exist under IFRS 9?
Amortised cost, fair value through other comprehensive income and fair value through profit or loss — depending on the business model and cash flows.
From what year does IFRS 9 apply?
For annual periods beginning on or after 1 January 2018.
See also
- IFRS accounting: chart of accounts, parallel accounting and conversion
- IFRS 7 Financial Instruments: Disclosures — Key Requirements and Examples
- IFRS Balance Sheet (Statement of Financial Position): Format, Line Items, Example
- IFRS 5 Non-current Assets Held for Sale and Discontinued Operations: key requirements and examples
- Names for an individual entrepreneur: how to choose one and use it lawfully
- Change of Director of an LLC in Uzbekistan
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