The International Accounting Standards Board (IASB) published a document titled "Request for Information, Post-implementation Review: IFRS 9 Financial Instruments". After consulting with financial statements preparers, especially from banks and finance companies in cooperation with the Saudi Central Bank, SOCPA explained in its response to IASB that the most important requirements of the standard that needs to be reviewed are those related to changes in the business model, as such changes are no longer as rare as they were when the standard was issued, especially after the covid-19 pandemic. It is therefore proposed that the standard should be more flexible and be able to reflect the impact of changes to the global economy, particularly regarding the reclassification of financial instruments.
An important topic that needs the board's attention in its review of that standard is the need for additional application guidance with regards to applying the Expired Cost model to several financial instruments that may not meet the literal definition, as they are held exclusively to obtain interest and principal returns. These include Islamic finance instruments that generate stable returns but do not meet that literal definition, and at the same time may not be appropriate to measure them at fair value through profit and loss.
Also, one of the important topics that SOCPA commented on in this regard is the distinction between measuring investment in equity instruments and measuring investment instruments through OCI, as the preparers of the financial statements do not see a justification for such a distinction.
SOCPA also called for the need to reconsider the subject of modifications to the contractual provisions of financial instruments and whether these modifications result in the derecognition of a financial asset, and recognition of a new asset, especially with the covid-19 pandemic and the intervention of the regulatory authorities to change such provisions to mitigate the negative effects of the pandemic.
SOCPA detailed remarks can be found by clicking here.