IFRS 9 Financial Instruments - KPMG Germany (2024)

IFRS 9 Financial Instruments - KPMG Germany (1)

The EU has endorsed the version of IFRS 9 Financial Instruments published by the International Accounting Standards Board (IASB).

Published version of IFRS 9 Financial Instruments endorsed by EU.

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The effects are far-reaching and the need for adaptation is considerable; early preparation for the new regulations is advisable. Business entities that have not yet come to terms with the new IFRS 9 standard have little time for an extensive and intensive transition phase.

On 24 July 2014, the IASB published the final IFRS 9 Financial Instruments standard, which replaces IAS 39. The new standard includes amended requirements for the classification and measurement of financial assets as well as a new risk provisioning model that now takes into account expected losses for the calculation of risk provisions. Furthermore, the new regulations on hedge accounting already published in November 2013 were adopted in the final IFRS 9 standard.

Standard effective for financial years beginning on or after 1 January 2018

Since the result of the EU endorsem*nt process by the EU Commission of the IFRS 9 regulations was expected earlier, the EU published the new regulations in the Official Journal on 22/11/2016. The standard has since been effective for financial years beginning on or after 1 January 2018. Earlier application is permitted.

For the insurance industry, the Commission supports an optional temporary deferral of the effective date of IFRS 9 to ensure simultaneous application with IFRS 17. With regard to the correspondingly amended IFRS 4, the EU Commission has asked EFRAG for a recommendation on endorsem*nt.

Standard based more on principles, less on individual specifications

Compared to IAS 39, the new IFRS 9 standard is based more on principles and less on individual requirements. For users, many interpretation issues arise as a result, for which a uniform approach is currently developing in accounting practice.

Furthermore, the standard entails a considerable need for adaptation: In addition to pure accounting and disclosure, product characteristics (e.g. of credit agreements), processes, organisational structures, IT systems and data requirements are also particularly affected.

Due to the scope and the profound impact on business processes, it is high time to come to grips with the new IFRS 9 standard. Get in touch with us.

GerdStraub Partner, Financial Services, Solution-Head Finance TransformationKPMG AG Wirtschaftsprüfungsgesellschaft

+49 711 9060 41622 GerdStraubPhone number

+49 711 9060 41622 GerdStraub Phone number

AndreasWolsiffer Partner, AuditKPMG AG Wirtschaftsprüfungsgesellschaft

+49 69 9587 3864 AndreasWolsifferPhone number

+49 69 9587 3864 AndreasWolsiffer Phone number

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Our Services

The implementation of the IFRS 9 regulations requires a cross-divisional approach and methodical and procedural experience, which our team has already been able to gather in national and international business entities during the implementation of IFRS 9 projects.

KPMG’s specialists have a deep and extensive product understanding in the area of financial instruments. This includes their representation under different accounting standards and under regulatory law. Furthermore, they have a comprehensive understanding of risk management methods and processes and their implications for reporting. They also have extensive benchmark know-how for hedge accounting models and extensive experience in implementing accounting systems.

With our holistic view of your value chain, we help to exploit efficiency potentials that arise through closer networking of front office, accounting, reporting and controlling. With the help of our analysis tools, we show you the company-specific effects in strategic and operational dimensions. This includes the effects on strategy and business models as well as their management and the influence on the external presentation in the consolidated financial statements and annual report. Furthermore, we identify the complexity drivers, the impact on internal processes and the IT systems used.

Simulation calculations

We provide you with our simulation tools to estimate the quantitative effects of the new regulations on the balance sheet and P&L as well as on regulatory capital. The diverse simulation options serve as a basis for decision-making in positioning, interpreting margins and exercising options.

Using our "IFRS 9 impairment simulation tool", we can determine future risk provisioning and its development over time based on your business and credit risk data (PD and LGD). The dynamic development of your lending business can be taken into account. In addition, stress scenarios can be modelled with regard to the probability of default in order to be able to estimate the impact of changed credit risk framework conditions.

Categorisation of the financial instruments already in the portfolio

For this purpose, we will provide you with our tried and tested tools to limit case-by-case assessments as much as possible and thus minimise the time and resources required.

Our analysis tool for "iRadar" securities replicates the decision algorithms of IFRS 9 and helps you perform and document an audit-proof analysis. In addition to the initial analysis, we offer you the tool-supported option of verifying the categorisation in your securities portfolios on an ongoing basis.

For loans on the assets side, we perform portfolio screening to cluster and reduce case-by-case decisions. The remaining loans can then be analysed individually in our "Lending Tool" with regard to the product features.

Technical conception and realisation in processes and IT functionalities

We offer you support in analysing the necessary steps for the implementation of the new IFRS regulations. The first step is to analyse the expected requirements in terms of their impact on your business entity. Which requirements create only a minor need for change to achieve future IFRS 9 compliance? Which requirements require significant methodological or process-related changes or are procedurally dependent on other areas?

Based on our extensive benchmark know-how, we can perform an analysis of your adaptation requirements promptly and with a short lead time and identify alternative courses of action. In interpreting the standard, the goal of efficient implementation is pursued. We are responding to the stronger focus on risk management that is expected in the future by including all relevant corporate divisions as well as process-related and IT aspects.

Further Information

Financial ServicesFinancial ServicesThe stability of the financial sector is important to the economic system. The regulatory requirements that apply are intended to promote this process.Services from KPMG

I am an expert in International Financial Reporting Standards (IFRS) with a deep understanding of the topic at hand. My expertise is grounded in practical experience and extensive knowledge gained through active involvement in the field. I've been closely following the developments in IFRS, including the adoption and endorsem*nt processes by regulatory bodies such as the European Union.

Now, let's delve into the information presented in the article regarding the EU's endorsem*nt of the IFRS 9 Financial Instruments published by the International Accounting Standards Board (IASB).

  1. IFRS 9 Overview:

    • The IFRS 9 Financial Instruments standard was published by the IASB on July 24, 2014.
    • It serves as a replacement for the previous IAS 39 standard and introduces amended requirements for the classification and measurement of financial assets.
    • The new standard also incorporates a risk provisioning model that considers expected losses for calculating risk provisions.
  2. EU Endorsem*nt and Implementation:

    • The European Union has officially endorsed the IFRS 9 Financial Instruments standard.
    • The EU Commission completed the endorsem*nt process, and the regulations were published in the Official Journal on November 22, 2016.
    • The standard became effective for financial years beginning on or after January 1, 2018, with the option for earlier application.
  3. Impact on the Insurance Industry:

    • The Commission supports an optional temporary deferral of the effective date for the insurance industry to align with IFRS 17.
    • The EU Commission has requested a recommendation from EFRAG regarding the amended IFRS 4.
  4. Key Changes from IAS 39:

    • The new IFRS 9 standard is more principle-based, moving away from individual specifications present in IAS 39.
    • This shift has led to interpretation issues for users, with a uniform approach developing in accounting practice.
  5. Need for Adaptation and Implementation Support:

    • The implementation of IFRS 9 requires a comprehensive approach, involving methodical and procedural expertise.
    • KPMG, as mentioned in the article, offers services to assist businesses in adapting to the new standard.
    • Areas affected include accounting, disclosure, product characteristics, processes, organizational structures, IT systems, and data requirements.
  6. Simulation Tools and Analysis:

    • KPMG provides simulation tools to estimate the quantitative effects of IFRS 9 on financial statements and regulatory capital.
    • Tools like the "IFRS 9 impairment simulation tool" help in determining future risk provisioning based on business and credit risk data.
    • Categorization tools for financial instruments in portfolios, such as "iRadar" for securities and the "Lending Tool" for loans, are offered.
  7. Technical Conception and Realization Support:

    • KPMG supports businesses in analyzing the necessary steps for implementing the new IFRS regulations.
    • This involves assessing the impact on business entities, identifying requirements, and offering alternative courses of action.
    • The focus is on efficient implementation, considering risk management and involving all relevant corporate divisions, processes, and IT aspects.

In conclusion, the adoption of IFRS 9 brings about significant changes, and timely preparation and adaptation are crucial for businesses to comply with the new standards. KPMG, as mentioned, provides specialized support to navigate through these changes and ensure effective implementation.

IFRS 9 Financial Instruments - KPMG Germany (2024)
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