My first Publication ocbc_ar17_fullreport_english | Page 271

50. FULL CONVERGENCE WITH INTERNATIONAL FINANCIAL REPORTING
STANDARDS AND ADOPTION OF NEW ACCOUNTING STANDARDS
AND INTERPRETATIONS (continued)
50.1 APPLICABLE TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDING 31 DECEMBER 2018 (continued)
(II) SFRS(I) 9
With effect from 1 January 2018, SFRS(I) 9 supersedes FRS 39 Financial Instruments: Recognition and Measurement. SFRS(I) 9 prescribes
new accounting requirements for classification and measurement of financial instruments, a new expected credit loss model of
measuring impairment of financial assets, and new general hedge accounting requirements.
The date of transition to SFRS(I) 9 is 1 January 2018, as the Group plans to apply the exemptions granted under SFRS(I) 1 and do not
restate the financial information of its comparative period in respect of financial instruments. A first-time adopter that elects to apply
the exemption will recognise the cumulative effect of adopting SFRS(I) 9 in Revenue Reserves as at 1 January 2018.
The adoption of SFRS(I) 9 is generally applied retrospectively, except as described below:
• The Group will make the following assessments based on the basis of facts and circumstances that existed as at 1 January 2018,
which is the date of transition to SFRS(I) 9:
– The determination of the business model within which financial assets are held.
– The determination of whether the contractual terms of a financial asset give rise to cash flows that are solely payments of
principal and interest on the principal outstanding.
– The designation of an investment in equity instruments that is not held for trading as at fair value through other
comprehensive income (“FVOCI”).
– The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at fair
value through profit or loss (“FVTPL”).
• The Group plans to apply new hedge accounting requirements prospectively. All hedging relationships designated under the
existing accounting standard as at 31 December 2017 that meet the criteria for hedge accounting under SFRS(I) 9 as at 1 January
2018 will be regarded as continuing hedging relationships.
The information below reflects the Group’s expectation of the implications arising from changes in the accounting treatment.
However, the actual tax effect may change when the transition adjustments are finalised. The Group does not expect the adoption of
SFRS(I) 9 to have a significant impact on its CET1 Capital.
(i) Classification and measurement: financial assets
SFRS(I) 9 introduces a principle-based approach to the classification of financial assets. Classification and measurement of financial
assets are determined based on the contractual cash flow characteristics of the financial assets and the business model associated
with the financial assets.
A debt financial asset is measured at amortised cost if it meets both of the following conditions and is not designated at FVTPL:
• it is held within a business model whose objective is to hold the asset until maturity to collect contractual cash flows; and
• its contractual terms give rise to cash flows that are solely payments of principal and interest on the principal outstanding.
A debt financial asset is measured at FVOCI if it meets both of the following conditions and is not designated at FVTPL:
• it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial
asset; and
• its contractual terms give rise to cash flows that are solely payments of principal and interest on the principal outstanding.
Equity instruments held for trading are classified at FVTPL. Equity instruments that are not held for trading are either classified at
FVTPL or FVOCI, subject to an irrevocable election.
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