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    IFRIC Interpretation 9

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    IFRIC 9 IFRIC Interpretation 9 Reassessment of Embedded Derivatives This version includes an amendment resulting from IFRSs issued up to 31 December 2008. IFRIC 9 Reassessment of Embedded Derivatives was developed by the International Financial Reporting Interpretations Committee and issued by the International Accounting Standards Board in March 2006. IFRIC 9 has been amended by IFRS 3 Business Combinations (as revised in January 2008).* * effective date 1 July 2009 © IASCF 2501 IFRIC

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    IFRIC Interpretation 9

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    IFRIC 9 IFRIC Interpretation 9 Reassessment of Embedded Derivatives This version includes an amendment resulting from IFRSs issued up to 31 December 2008. IFRIC 9 Reassessment of Embedded Derivatives was developed by the International Financial Reporting Interpretations Committee and issued by the International Accounting Standards Board in March 2006. IFRIC 9 has been amended by IFRS 3 Business Combinations (as revised in January 2008).* * effective date 1 July 2009 © IASCF 2501 IFRIC

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    IFRIC 9 IFRIC Interpretation 9 Reassessment of Embedded Derivatives This version includes an amendment resulting from IFRSs issued up to 31 December 2008. IFRIC 9 Reassessment of Embedded Derivatives was developed by the International Financial Reporting Interpretations Committee and issued by the International Accounting Standards Board in March 2006. IFRIC 9 has been amended by IFRS 3 Business Combinations (as revised in January 2008).* * effective date 1 July 2009 © IASCF 2501 IFRIC

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    Download as PDF, TXT or read online from Scribd
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    IFRIC Interpretation 9

    Uploaded by

    ZN
    IFRIC 9 IFRIC Interpretation 9 Reassessment of Embedded Derivatives This version includes an amendment resulting from IFRSs issued up to 31 December 2008. IFRIC 9 Reassessment of Embedded Derivatives was developed by the International Financial Reporting Interpretations Committee and issued by the International Accounting Standards Board in March 2006. IFRIC 9 has been amended by IFRS 3 Business Combinations (as revised in January 2008).* * effective date 1 July 2009 © IASCF 2501 IFRIC

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    IFRIC 9

    IFRIC Interpretation 9

    Reassessment of Embedded Derivatives

    This version includes an amendment resulting from IFRSs issued up to 31 December 2008.

    IFRIC 9 Reassessment of Embedded Derivatives was developed by the International Financial


    Reporting Interpretations Committee and issued by the International Accounting
    Standards Board in March 2006.

    IFRIC 9 has been amended by IFRS 3 Business Combinations (as revised in January 2008).*

    * effective date 1 July 2009

    © IASCF 2501
    IFRIC 9

    CONTENTS
    paragraphs

    IFRIC INTERPRETATION 9
    REASSESSMENT OF EMBEDDED DERIVATIVES
    REFERENCES
    BACKGROUND 1–2
    SCOPE 3–5
    ISSUES 6
    CONSENSUS 7–8
    EFFECTIVE DATE AND TRANSITION 9
    BASIS FOR CONCLUSIONS

    2502 © IASCF
    IFRIC 9

    IFRIC Interpretation 9 Reassessment of Embedded Derivatives (IFRIC 9) is set out in


    paragraphs 1–9. IFRIC 9 is accompanied by a Basis for Conclusions. The scope and
    authority of Interpretations are set out in paragraphs 2 and 7–17 of the Preface to
    International Financial Reporting Standards.

    © IASCF 2503
    IFRIC 9

    IFRIC Interpretation 9
    Reassessment of Embedded Derivatives

    References

    • IAS 39 Financial Instruments: Recognition and Measurement

    • IFRS 1 First-time Adoption of International Financial Reporting Standards

    • IFRS 3 Business Combinations

    Background

    1 IAS 39 paragraph 10 describes an embedded derivative as ‘a component of a


    hybrid (combined) instrument that also includes a non-derivative host contract—
    with the effect that some of the cash flows of the combined instrument vary in a
    way similar to a stand-alone derivative.’

    2 IAS 39 paragraph 11 requires an embedded derivative to be separated from the


    host contract and accounted for as a derivative if, and only if:

    (a) the economic characteristics and risks of the embedded derivative are not
    closely related to the economic characteristics and risks of the host
    contract;

    (b) a separate instrument with the same terms as the embedded derivative
    would meet the definition of a derivative; and

    (c) the hybrid (combined) instrument is not measured at fair value with
    changes in fair value recognised in profit or loss (ie a derivative that is
    embedded in a financial asset or financial liability at fair value through
    profit or loss is not separated).

    Scope

    3 Subject to paragraphs 4 and 5 below, this Interpretation applies to all embedded


    derivatives within the scope of IAS 39.

    4 This Interpretation does not address remeasurement issues arising from a


    reassessment of embedded derivatives.

    5 This Interpretation does not address the acquisition of contracts with embedded
    derivatives in a business combination nor their possible reassessment at the date
    of acquisition.*

    * IFRS 3 (as revised in 2008) addresses the acquisition of contracts with embedded derivatives in a
    business combination.

    2504 © IASCF
    IFRIC 9

    Issues

    6 IAS 39 requires an entity, when it first becomes a party to a contract, to assess


    whether any embedded derivatives contained in the contract are required to be
    separated from the host contract and accounted for as derivatives under the
    Standard. This Interpretation addresses the following issues:

    (a) Does IAS 39 require such an assessment to be made only when the entity
    first becomes a party to the contract, or should the assessment be
    reconsidered throughout the life of the contract?

    (b) Should a first-time adopter make its assessment on the basis of the
    conditions that existed when the entity first became a party to the
    contract, or those prevailing when the entity adopts IFRSs for the first
    time?

    Consensus

    7 An entity shall assess whether an embedded derivative is required to be separated


    from the host contract and accounted for as a derivative when the entity first
    becomes a party to the contract. Subsequent reassessment is prohibited unless
    there is a change in the terms of the contract that significantly modifies the cash
    flows that otherwise would be required under the contract, in which case
    reassessment is required. An entity determines whether a modification to cash
    flows is significant by considering the extent to which the expected future cash
    flows associated with the embedded derivative, the host contract or both have
    changed and whether the change is significant relative to the previously expected
    cash flows on the contract.

    8 A first-time adopter shall assess whether an embedded derivative is required to be


    separated from the host contract and accounted for as a derivative on the basis of
    the conditions that existed at the later of the date it first became a party to the
    contract and the date a reassessment is required by paragraph 7.

    Effective date and transition

    9 An entity shall apply this Interpretation for annual periods beginning on or after
    1 June 2006. Earlier application is encouraged. If an entity applies the
    Interpretation for a period beginning before 1 June 2006, it shall disclose that fact.
    The Interpretation shall be applied retrospectively.

    © IASCF 2505

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