FRSC Adopts New Standard on Classification and Measurement of Financial Instruments (05-10)

May 2010


The Financial Reporting Standards Council (FRSC) approved in its meeting in March 2010 the adoption of IFRS 9, Financial Instruments: Classification and Measurement, issued by the International Accounting Standards Board (IASB), as Philippine Financial Reporting Standard (PFRS) 9.

The standard introduces new requirements on the classification and measurement of financial assets. It uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the many different rules in IAS 39, Financial Instruments: Recognition and Measurement. The approach in the new standard is based on how an entity manages its financial instruments (its business model) and the contractual cash flow characteristics of the financial assets. The new standard also requires a single impairment method to be used, replacing the many different impairment methods in IAS 39.

The new standard represents the completion of the first part of a three-part project of the IASB to replace IAS 39 with a new standard – IFRS 9, Financial Instruments. The second part of the project will address proposals on the impairment methodology for financial assets and the third part, on hedge accounting.

The standard is effective date for mandatory adoption on January 1, 2013. Earlier application is permitted for financial statements beginning on or after January 1, 2010 in the Philippines.

The FRSC has submitted PFRS 9 to the Board of Accountancy for approval.