The new hybrid credit instruments

A “market driven” vision for leveraged loans

In 2005 the IASB & FASB jointly started a new accounting project in order to reduce the complexities related to the IAS 39 financial asset classification. This study aims at simplifying the financial instruments’ classification, hedge accounting rules and better monitoring financial market evolutions as well as financial engineering developments.

IFRS 9 is composed by three main pillars:

  • Classification and measurement”, which replaces existing categories of financial assets and liabilities with new ones;
  • Impairment”, that proposes a new forward looking model, based on expected credit losses instead of already incurred ones; 
  • Hedge accounting”, focused on hedging test simplification and on the extension of eligible hedging instruments’ perimeter.
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