Last update 27/10/2019
IFRS 9 Reclassification of financial instruments
For financial assets, reclassification is required between FVTPL, FVTOCI and amortised cost, if and only if the entity’s business model objective for its financial assets changes so its previous model assessment would no longer apply. [IFRS 9, paragraph 4.4.1]
If reclassification is appropriate, it must be done prospectively from the reclassification date which is defined as the first day of the first reporting period following the change in business model. An entity does not restate any previously recognised gains, losses, or interest.
IFRS 9 does not allow reclassification: IFRS 9 Reclassification of financial instruments
- for equity investments measured at FVTOCI, or
- where the fair value option has been exercised in any circumstance for a financial assets or financial liability.
The IFRS 9 Reclassification of financial instruments requirements for reclassification of financial instruments are significantly different from those in IAS 39.
| IAS 39 |
IFRS 9 |
(IAS 39.50-54) IFRS 9 – Reclassification of financial instruments |
IFRS 9 – Reclassification of financial instruments IFRS 9 – Reclassification of financial instruments |
Changes in an entity’s business model that will result in a reclassification of financial assets are expected to be very infrequent, for example, when the entity has acquired, disposed of or terminated a business line. IFRS 9 Reclassification of financial instruments
The following examples from IFRS 9, which do not represent a change in the business model, reiterate how rare reclassifications will be:IFRS 9 Reclassification of financial instruments
- A change in intention related to particular financial assets (even in circumstances of significant changes in market conditions).
- The temporary disappearance of a particular market for financial assets. IFRS 9 – Reclassification of financial instruments
- A transfer of financial assets between parts of the entity with different business models. (IFRS 9.B4.4.3)
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Note! Financial assets are only reclassified when there are changes in the business model for managing the assets. A change in the entity’s business model is a significant event and, thus, is expected to be uncommon. Financial liabilities cannot be reclassified under IFRS 9. Overall, this simplifies the reclassification of financial instruments under IFRS 9 compared to IAS 39. |
For financial assets, reclassification is required between FVTPL, FVTOCI and amortised cost, if and only if the entity’s business model objective for its financial assets changes so its previous model assessment would no longer apply. [IFRS 9, paragraph 4.4.1]
If reclassification is appropriate, it must be done prospectively from the reclassification date which is defined as the first day of the first reporting period following the change in business model. An entity does not restate any previously recognised gains, losses, or interest.
IFRS 9 does not allow reclassification: IFRS 9 Reclassification of financial instruments
- for equity investments measured at FVTOCI, or IFRS 9 Reclassification of financial instruments
- where the fair value option has been exercised in any circumstance for a financial assets or financial liability.
Equity investments
All equity investments in scope of IFRS 9 are measured at fair value in the statement of financial position, with value changes recognised in profit or loss, except for those equity investments for which the entity has elected to present value changes in other comprehensive income.
The option to designate an equity instrument at FVTOCI is available at initial recognition and is irrevocable. This designation results in all gains and losses being presented in OCI except dividend income which is recognised in profit or loss. IFRS 9 Reclassification of financial instruments
See also: The IFRS Foundation