International financial reporting standards number 9 cbn issues guidance note

A very specific topic!

International Financial Reporting Standards (IFRS) Number 9, "Financial Instruments with Characteristics of Equity" (IFRS 9), was issued by the International Accounting Standards Board (IASB) in July 2014. The standard replaces IAS 32 and IAS 39, and introduces a new approach to accounting for financial instruments.

The Central Bank of Nigeria (CBN) has issued a Guidance Note on IFRS 9 to provide guidance to Nigerian companies on the implementation of the standard. The Guidance Note is intended to help companies understand the requirements of IFRS 9 and ensure consistency in the application of the standard.

Here are some key points from the CBN Guidance Note on IFRS 9:

Scope: The Guidance Note applies to all Nigerian companies that are required to prepare their financial statements in accordance with IFRS.

Objective: The objective of the Guidance Note is to provide guidance on the application of IFRS 9, particularly in relation to the classification and measurement of financial instruments.

Key Concepts:

  1. Financial Instruments: A financial instrument is any contract that gives rise to a financial asset of one party and a financial liability or equity instrument of another party.
  2. Classification: Financial instruments can be classified as either financial assets or financial liabilities.
  3. Measurement: Financial instruments can be measured at either amortized cost, fair value through profit or loss, or fair value through other comprehensive income.

Guidance on Specific Topics:

  1. Classification and Measurement of Financial Instruments: The Guidance Note provides guidance on the classification and measurement of financial instruments, including the application of the "business model" and "cash flow characteristics" tests.
  2. Hedges: The Guidance Note provides guidance on the accounting for hedges, including the application of the "hedge effectiveness" test.
  3. Fair Value Measurement: The Guidance Note provides guidance on the measurement of financial instruments at fair value, including the use of observable and unobservable inputs.
  4. Impairment: The Guidance Note provides guidance on the impairment of financial instruments, including the application of the "expected credit loss" model.

Implementation Date: The Guidance Note is effective for annual periods beginning on or after January 1, 2018.

Conclusion: The CBN Guidance Note on IFRS 9 provides valuable guidance to Nigerian companies on the implementation of the standard, particularly in relation to the classification and measurement of financial instruments.