Last week the International Accounting Standards Board (IASB) issued a new International Financial Reporting Standard (IFRS) on the classification and measurement of financial assets. Publication of IFRS 9 Financial Instruments completes the first of a three-part project to replace IAS 39 Financial Instruments: Recognition and Measurement. “The new standard enhances the ability of investors and other users of financial information to understand the accounting of financial assets and reduces complexity,” says the IASB release. The IASB received broad support feedback for its approach in IFRS 9, including the requirement to asses an entity’s business model first, to avoid considering the contractual cash flows of every individual asset. The Board also changed the proposed accounting for structured credit-linked investments and for purchases of distressed debt, and decided not to finalize requirements for financial liabilities, for which it expects to issue guidance in 2010.

The effective date for mandatory adoption of IFRS 9 Financial Instruments is January 1, 2013. A summary of the entire IAS 39 replacement project—including posted feedback and updates—is available here.