Consultation: Amendments to the Classification and Measurement of Financial Instruments

ACCA welcomes the opportunity to provide views in response to the IASB’s exposure draft (ED) for the proposed amendments to IFRS 9 and IFRS 7 in relation to Amendments to the Classification and Measurement of Financial Instruments.

This was done with the assistance of ACCA’s Global Forum for Corporate Reporting.

The proposals in this ED address two types of transactions that are becoming increasingly popular, ie, settlement through electronic payments and ESG-linked loans.

A survey conducted by ACCA found that 70% of respondents are using fintech for money transfer. Payments and lending are significant areas of fintech adoption.

Another survey conducted by ACCA found that 6% of respondents are already using green finance. Though not all green finance products will contain contractual terms that may change the timing or amount of future cash flows, the prevalence of financial instruments that contain these contractual terms may increase if more organisations turn towards green finance products in their transition to net-zero. In the same survey, 22% said they are likely to use green finance and 41% said they may use it. That is despite only 10% having a good level of knowledge/understanding or being an expert in green finance.

We are supportive of the proposed principle-based approach to determine whether contractual cash flows, including those with ESG-linked or similar features, are solely payments of principal and interest on the principal amount outstanding. The key principle being whether the changes in the timing or amount of contractual cash flows are consistent with a basic lending arrangement. As new instruments are introduced in the market, a principle-based approach would allow instruments with similar features to be consistently assessed using the same set of requirements. The proposed amendments in the ED will assist preparers in applying requirements in IFRS 9 consistently and thus supporting comparability of financial statements across entities.

The proposed disclosure requirements should provide relevant information to help users understand the significance of changes in contractual cash flows to an entity’s financial statements. However, duplication of disclosure requirements should be avoided.

As there could be more than one type of contractual terms that may change the timing or amount of contractual cash flows, we are supportive of disclosure requirements that encourage entities to scale the extent of information to be provided to users.

To read the response in full, please download the consultation document on this page.