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IFRS 9 examinability

Graham Holt, the examiner for ACCA paper P2, has long stated that he wishes P2 to remain a “cutting edge” paper.  This means that he is fond of testing new accounting standards, especially those that are controversial.  We at ExP think that this is both appropriate and fair.

We’ve been asked by a number of people via the “ask the tutor” facility whether the new standard for financial instruments, IFRS 9 could be examined in the December 2009 exam.  The answer is that IFRS 9 is definitely not within the scope of the P2 exam in December 2009, though it will be from June 2010.

HOWEVER, the controversy around some of the perceived weaknesses of IAS 39 would be within the syllabus for the December 2009 exam.  This means that the new rules won’t be examined, but we can easily imagine a question that asks, say, if the number of different classifications within IAS 39 is excessively confusing and asking students to criticise whether people can really be expected to know all of IAS 39’s rather piecemeal rules.  For example, the treatment of transaction costs is rather inconsistent within IAS 39 depending on the initial categorisation of an investment; so that the same investment in the same shares could be required to include transaction costs (if classified as available for sale) or require that those transaction costs are written off (if classified as held at fair value through profit or loss).

Similarly, some weaknesses in IAS 39 that could be “inspired” by the terms of IFRS 9 could be in there, such as whether it really gives a true and fair view to have gains and losses on available for sale financial assets shown initially through equity, yet dividends from those same investments shown in profit.  Wouldn’t it be more sensible to have a uniform treatment for all gains and losses relating to that instrument (as IFRS 9 does).

So the full answer is a bit more complicated than the basic answer.  The examiner can’t test IFRS 9 directly, but he could test it through the “back door” by asking for criticism of the previous rules.

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