Background

BC4.254 The IASB concluded its post-implementation review of the classification and measurement requirements in IFRS 9 and of the related requirements in IFRS 7 (Classification and Measurement PIR) in December 2022.

BC4.255 Participants in the Classification and Measurement PIR noted the challenges of assessing the contractual cash flows of financial assets with features linked to the achievement of environmental, social and governance (ESG) targets. The IASB decided that standard-setting was required to address participants' concerns about potential diversity in practice developing, because the matter was pervasive and could have substantial consequences. The IASB decided it would be inappropriate to create an exception to the requirements in IFRS 9 for such financial assets, because their classification should be determined on the same basis as any other financial asset. The IASB agreed with participants that amortised cost provides useful information to users of financial statements about the amount, timing and uncertainty of future cash flows on some financial assets with ESG-linked features.

BC4.256 The IASB decided to clarify how to apply the requirements in the Application Guidance to Section 4.1 of IFRS 9 to all financial assets, including those with ESG-linked features, by amending the requirements relating to:

(a) the elements of interest that are consistent with a basic lending arrangement (see paragraphs BC4.259–BC4.262); and