IFRS 9 covers how financial instruments like loans and receivables are classified, measured and impaired. This guide explains the essentials, including expected credit losses.
Published July 2026 · Updated July 2026
IFRS 9, Financial Instruments, sets out how to classify, measure and provide for financial assets and liabilities, things like loans, trade receivables and investments.
Financial assets are measured either at amortised cost or at fair value, depending on the business's model for holding them and the nature of their cash flows. This determines whether changes in value hit profit or reserves.
IFRS 9's headline change is the expected credit loss (ECL) model. Instead of waiting for a customer to default, you provide for likely losses in advance based on expected risk, so bad debts are recognised earlier and more realistically.
You are owed £100,000 by customers:
It applies to companies reporting under IFRS. Under UK GAAP (FRS 102) there are similar but simpler rules for financial instruments and bad debt provisions.
An estimate of receivables you may not collect, recognised in advance based on expected risk rather than after a default.
It gives a more realistic view of what your receivables are truly worth, rather than overstating them until a customer formally defaults.
Source: IFRS Foundation ↗. This glossary is written for small business owners, so definitions are simplified. Tax rates and thresholds reflect 2026/27 UK rules and change over time. Berified does not provide accounting, tax or legal advice; always check the source or a qualified adviser.