CFM21820 - IFRS 9: The scope of IFRS 9

Who does IFRS 9 apply to?

IFRS 9 became mandatory for periods of account beginning on or after 1 January 2018. IFRS 9 can be applied in the following circumstances:

  • A company that applies IFRS; or
  • A company that applies FRS 101; or
  • A company that applies FRS 102 and has elected to apply the recognition and measurement provisions of IFRS 9.

Note that, in this guidance, the word ‘company’ is often used rather than the more general term ‘entity’ used in the accounting standard, as the guidance in the CFM is primarily concerned with companies within the charge to Corporation Tax.

IAS 32 and IFRS 7 continue to apply to those companies applying IFRS and FRS 101. See CFM21500 for more details on IAS 32 and CFM21506 for more details on IFRS 7.

What does IFRS9 apply to?

IFRS 9 applies to all financial instruments, with some exceptions that are summarised at CFM21140. In addition, IFRS 9 applies to contracts that are permitted to be net settled in cash (or another financial instrument), unless the contracts are held as part of normal activities with the intention that there will be the delivery of a non-financial item.

For example, IFRS 9 will apply to a contract to buy/sell a non-financial asset (such as coal) for a set amount in 12 months, where the company can settle the contract in cash for the difference between the value of the coal in 12 months and the value set in the contract, unless the company intends to receive delivery of the non-financial asset (coal) as part of its normal trading activities.

What does IFRS9 not apply to?

Non-financial assets and non-financial liabilities are outside the scope of IFRS9. Examples include

physical assets such as

  • stock-in-trade; property, plant and equipment; leased assets;

intangibles, such as

  • patents and trademarks; prepayments for goods or services;

non-contractual liabilities such as

  • taxes; and minority interests.

Commodities, such as

  • gold bullion,

are also outside the scope of IFRS9.

In cases where a company grants an option giving someone else the power to buy or sell a non-financial asset, with an alternative for cash settlement, the company has no say over whether it delivers, or takes delivery of, the asset - that will be up to the option holder. The company therefore cannot claim that it wrote the option for the purpose of receipt or delivery of the asset. Such an option will therefore always be within the scope of IFRS 9.