CFM21850 - IFRS 9: classification of financial liabilities

For those entities applying IFRS or FRS 101 with a period of account beginning before 1 January 2018 refer to IAS 39 for the recognition and measurement of financial instruments at CFM21520+

Financial liabilities

Financial liabilities are defined at CFM21060.

Amortised cost

IFRS 9 requires financial liabilities to be classified as amortised cost except where the specific exclusions below apply.

Fair value through profit or loss

The following financial liabilities should be classified as FVTPL:

  • Financial liabilities that are held for trading (the liability is acquired for the purpose of selling in the short term);
  • Financial liabilities that are derivatives (guidance on accounting for derivatives can be found at CFM24000+; or
  • Where a company has made an irrevocable election to designate the financial liability as FVTPL when doing so reduces a measurement or recognition inconsistency (sometimes referred to as an accounting mismatch).

Specific exemptions

IFRS 9 contains specific rules for the accounting for:

  • financial guarantee contracts;
  • commitments to provide below market rate loans; and
  • contingent consideration recognised by an acquirer in a business combination.