IFRS 9 amends some of the requirements of IFRS 7 Financial Instruments: Disclosures including adding disclosures about investments in equity instruments designated as at FVTOCI, disclosures on risk management activities and hedge accounting and disclosures on credit risk management and impairment.

Changes to IFRS 9 – Prepayment features with negative compensation to be considered SPPI. IFRS 9 Financial Instruments currently permits financial assets with early prepayment options to be measured at amortised cost or FVTOCI, if: The business model is ‘hold to collect’, and.

Prepayments do not usually meet the definition of a financial instrument as a prepayment does not generally represent a contractual right to receive cash or another financial asset from another entity; it represents the expectation of the delivery of goods or services which have been paid for in advance.

Prepayments for goods or services are not financial assets because they are associated with the receipt of goods or services. They do not give rise to a present right to receive cash or any other financial asset.

Main issues addressed by the amendments to IFRS 9 The amendment means that entities will now be able to measure some prepayable financial assets with negative compensation at amortised cost. The amendments are effective for annual periods beginning on or after 1 January 2019, with earlier application permitted.

A prepaid expense is a type of asset on the balance sheet that results from a business making advanced payments for goods or services to be received in the future. Prepaid expenses are initially recorded as assets, but their value is expensed over time onto the income statement.

Only debt instruments are capable of meeting the contractual cash flows characteristics test required by IFRS 9. The assessment as to whether contractual cash flows are solely payments of principal and interest is made in the currency in which the financial asset is denominated.

When a company prepays for an expense, it is recognized as a prepaid asset on the balance sheet, with a simultaneous entry being recorded that reduces the company’s cash (or payment account) by the same amount.

In the final accounts prepaid expenses are: deducted from the expense amount of the trial balance before listing it in the Income Statement. shown as a current asset in the year end balance sheet.

The International Accounting Standards Board (IASB) has published ‘Pre­pay­ment Features with Negative Com­pen­sa­tion (Amend­ments to IFRS 9)’ to address the concerns about how IFRS 9 ‘Financial In­stru­ments’ clas­si­fies par­tic­u­lar pre­payable financial assets.

Please let me know relavant IAS for Prepaid Expenses under IFRS. A prepaid expense is an expenditure paid for in one accounting period, but for which the underlying asset will not be consumed until a future period. When the asset is eventually consumed, it is charged to expense.

IFRS 1 First-time Adoption of International Financial Reporting Standards. IFRS 2 Share-based Payment. IFRS 3 Business Combinations. IFRS 4 Insurance Contracts. IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. IFRS 6 Exploration for and Evaluation of Mineral Resources. IFRS 7 Financial Instruments: Disclosures.

Early ap­pli­ca­tion is permitted so entities can apply the amend­ments together with IFRS 9 if they wish so. Ad­di­tional tran­si­tional re­quire­ments and cor­re­spond­ing dis­clo­sure re­quire­ments must be observed when applying the amend­ments for the first time.