Mechanically: this Standard amends AASB 7 and AASB 9 to (a) permit earlier derecognition of a financial liability when settled via an electronic payment system, (b) add guidance on assessing contractual cash flows where assets have ESG or similar contingent features, and (c) introduce extra disclosures for certain equity investments and contingent contractual features. It applies to entities under AASB 1057 for annual periods from 1 January 2026. Reporting entities must apply new judgement tests (B3.3.8–B3.3.10; B4.1.8A–B4.1.10A) and provide the added disclosures (11A–11B; 20B–20D).

AASB 2024-2 amends two existing Australian Accounting Standards, AASB 7 Financial Instruments: Disclosures (August 2015) and AASB 9 Financial Instruments (December 2014), to implement the International Accounting Standards Board’s May 2024 amendments to the classification and measurement of financial instruments. The Standard makes discrete, mechanical changes in three main areas: (1) when a financial liability is derecognised for settlement made through an electronic payment system; (2) how contractual cash flows of financial assets that include environmental, social and corporate governance (ESG) and similar contingent features are assessed for classification purposes; and (3) expanded disclosure requirements for (a) equity instruments designated at fair value through other comprehensive income (FVOCI) and (b) financial instruments with contingent features that do not relate directly to basic lending risks and costs.

Mechanically, the Standard adds new disclosure paragraphs to AASB 7 (paragraphs 20B-20D and illustrative additions to 11A and 11B), permits an entity to treat a financial liability as discharged prior to the legal settlement date where specific conditions about electronic payment initiation and settlement risk are met (Application Guidance additions B3.1.2A and B3.3.8-B3.3.10 in AASB 9), and clarifies assessment rules and examples in the Application Guidance to Section 4.1 of AASB 9 (notably B4.1.8A, B4.1.10A, B4.1.16A and B4.1.20A). The Standard prescribes transition mechanics: retrospective application in accordance with AASB 108 except as specified (paragraphs 7.2.47-7.2.49 of AASB 9), and limits certain retrospective disclosure obligations in the period of initial application (paragraph 44MM of the amended AASB 7). The amendments apply to annual reporting periods beginning on or after 1 January 2026, with earlier application permitted (paragraphs 7.1.12-7.1.13; AASB 7, Effective date and transition cross-reference). For legal purposes the legislative instrument commences on 31 December 2025 (Commencement of the legislative instrument).

The Standard is made by the AASB under section 334 of the Corporations Act 2001 (as stated in the Accounting Standard heading), and therefore operates as a legislative instrument within Australia’s financial reporting regime. The text includes illustrative examples (for instance Instruments EA and I) embedded in the Application Guidance that demonstrate how the new rules apply to ESG-linked features and indexed variables.

The Standard introduces and clarifies several concept-level tests and disclosure obligations that change the accounting mechanics for a defined set of instruments and events. Key concepts are:

Derecognition timing for liabilities settled via electronic payment systems: A liability is generally derecognised on the settlement date (see B3.1.2A), but B3.3.8 permits an entity to deem a liability discharged earlier if, and only if, the entity has initiated a payment instruction that meets three cumulative conditions: (a) no practical ability to withdraw, stop or cancel the payment instruction; (b) no practical ability to access the cash to be used for settlement as a result of the instruction; and (c) the settlement risk associated with the electronic payment system is insignificant. Paragraph B3.3.9 defines “insignificant” settlement risk in operational terms, and B3.3.10 requires consistent application to all settlements through the same electronic payment system.
Assessment of contractual cash flows where instruments include contingent ESG or similar features: The fundamental classification test in Section 4.1 of AASB 9,whether contractual cash flows are solely payments of principal and interest (SPPI),must be applied taking into account contingent features. Paragraph B4.1.8A restates the SPPI concept and provides triggers where indexing to non-basic lending variables or participation in debtor revenue/profit renders cash flows inconsistent with a basic lending arrangement. Paragraph B4.1.10 requires the entity to consider all contractually possible scenarios, whether or not a change in contractual cash flows is probable. Paragraph B4.1.10A adds a targeted rule for contingent features (for example, an interest rate adjustment tied to a carbon emissions reduction) where the nature of the contingent event does not relate directly to basic lending risks: the instrument meets SPPI only if, in all contractually possible scenarios, the contractual cash flows would not be significantly different from identical terms without the contingent feature. The Standard allows qualitative determination where that is possible, but requires quantitative testing where necessary. The Application Guidance supplies examples (Instrument EA and Instrument I) that illustrate when similar ESG-linked features pass or fail the SPPI assessment.
Expanded disclosures: AASB 7 is amended to require additional disclosures for equity instruments designated at FVOCI (amended paragraph 11A(c) and 11A(f) and 11B(d) requiring fair value information and disclosure of transfers of cumulative gains or losses within equity on derecognition). Paragraphs 20B-20D require entities to disclose, by class of financial asset and liability, qualitative descriptions of contingent events that could change contractual cash flows (20C(a)), quantitative information about the possible changes (20C(b)), and gross carrying amounts/amortised cost of instruments subject to such contractual terms (20C(c)). Paragraph 20D gives a concrete example: liabilities whose cash flows change if the entity achieves a reduction in carbon emissions.

The Standard applies to entities and financial statements in accordance with the application of AASB 7 and AASB 9 set out in AASB 1057 Application of Australian Accounting Standards (Application). Practically, the following groups are directly affected:

Banks and lenders: instruments that include contingent interest or performance-linked features, and structured finance instruments with tranches or non-recourse features, are directly subject to the renewed SPPI tests in the Application Guidance (B4.1.8A, B4.1.10A, B4.1.16A, B4.1.20A, B4.1.21-B4.1.23). Structured products and securitisations with contractually linked instruments must apply the look‑through and underlying pool requirements in B4.1.21-B4.1.23.
Corporates and energy/industry borrowers and lenders: any entity that issues or holds loans or bonds where the contractual cash flows change on achievement of ESG targets (for example, reductions in carbon emissions) must assess whether such contingent features affect classification and measurement under SPPI (B4.1.10A). Issuers whose debt instruments include indexed components tied to commodity or carbon price indices need to evaluate whether indexing to a non-basic lending variable removes SPPI compliance (B4.1.8A, example Instrument I).
Non-bank financial institutions and funds: entities holding equity investments designated at FVOCI must comply with added disclosure requirements (AASB 7, paragraph 11A(c), 11A(f) and 11B(d)). Asset managers and funds that include ESG-linked clauses in portfolio instruments must prepare the new qualitative and quantitative disclosures required by paragraphs 20B-20D.
Corporates that settle liabilities with modern payment rails: any entity that settles liabilities using electronic payment systems (including real-time gross settlement systems, faster payment systems or other electronic rails) may apply the derecognition relief in B3.3.8-B3.3.10 but will need to document and operationalise the criteria (no practical ability to cancel, no access to cash, insignificant settlement risk). Treasury and payments operations, in addition to accounting teams, will be involved.
Preparers, auditors and regulators: accountants and auditors must implement new assessment procedures and evidence standards for SPPI and the derecognition timing election for electronic payments, and be prepared to audit the additional disclosures and the transition adjustments under 7.2.47-7.2.49. The Standard is made under section 334 of the Corporations Act 2001 (Accounting Standard header), so it binds entities required to prepare financial statements under that Act.

The Standard places specific duties on preparers and gives them certain limited options. The duties arise from amendments to AASB 7 and AASB 9 and are precise in scope.

Duties under AASB 9 (classification, recognition and derecognition):

Assess derecognition timing for liabilities where settlement occurs via electronic payment systems: preparers may elect to deem a liability discharged before the legal settlement date only if all three conditions in paragraph B3.3.8 are met: inability to withdraw/stop/cancel the payment instruction; inability to access cash used for settlement as a result of the instruction; and insignificant settlement risk (B3.3.8). The preparer must apply the paragraph consistently to all settlements through the same electronic payment system (B3.3.10). Paragraph B3.1.2A preserves the baseline rule that liabilities are derecognised on the settlement date unless the B3.3.8 election is made.
Apply the SPPI test to contractual cash flows of financial assets with contingent ESG or similar features: the duty is to determine whether the contractual cash flows are solely payments of principal and interest in all contractually possible scenarios (B4.1.10; B4.1.10A). Where contingent features do not directly relate to basic lending risks (for example, an interest adjustment tied to greenhouse gas reductions), the asset meets SPPI only if the contractual cash flows are not significantly different from an otherwise identical instrument without the contingent feature in all contractually possible scenarios (B4.1.10A). The preparer must consider elements of interest separately and focus on the nature of compensation rather than only the amount (B4.1.8A).
Look-through duties and treatment of non-recourse and contractually linked instruments: when a financial asset has non‑recourse features, the preparer must “look through” to the underlying assets to determine whether cash flows meet SPPI (B4.1.16, B4.1.16A, B4.1.17). For contractually linked tranches, preparers apply B4.1.21-B4.1.26 (B4.1.20-B4.1.23).

Duties under AASB 7 (disclosure):

Provide additional FVOCI equity disclosures: entities that have designated investments in equity instruments at FVOCI must disclose, by class, the fair value at period end (11A(c)), and fair value gains or losses presented in OCI showing separately gains/losses related to investments derecognised during the period and those held at period end (11A(f)). If derecognitions occurred, disclose any equity transfers of cumulative gains or losses related to those derecognitions (11B(d)).

The text of AASB 2024-2 itself sets accounting requirements and does not list specific monetary penalties or criminal sanctions. The Accounting Standard is made by the AASB under section 334 of the Corporations Act 2001 (see Accounting Standard heading). That legal footing means the Standard is a legislative instrument within Australia’s statutory financial reporting framework; compliance is therefore required by entities that are subject to the Corporations Act and the AASB framework. The instrument also states commencement timing (for legal purposes the legislative instrument commences on 31 December 2025) and the effective period for financial reporting application (annual reporting periods beginning on or after 1 January 2026), with earlier application permitted (7.1.12-7.1.13).

The document does not specify enforcement bodies, specific pecuniary penalties or administrative sanctions; those enforcement mechanisms exist in the broader statutory framework (for example the Corporations Act, ASIC’s regulatory powers and the auditing and financial reporting regime) but are not delineated in this Standard. Practitioners must therefore read AASB 2024-2 as binding accounting law derived from s 334 of the Corporations Act and understand that non-compliance with accounting standards may, under the Corporations Act and related legislation, lead to enforcement action by regulators or impact statutory reporting obligations. The Standard itself prescribes retrospective application and disclosure obligations (7.2.47-7.2.49; 44LL-44MM) which will be material to auditors and regulators when assessing compliance; failure to make required disclosures or to apply classification/derecognition rules as stipulated would be a compliance matter under the statutory reporting regime rather than an offence detailed within this instrument.

In short, the Standard imposes binding accounting duties as a legislative instrument made under s 334, but it does not, within its own text, prescribe penalties. Enforcement therefore operates through the general statutory and regulatory architecture that governs financial reporting in Australia.

AASB 2024-2 amends AASB 7 and AASB 9 and explicitly cross-references other Australian Accounting Standards and international materials. The Standard is consequential to the IASB’s Amendments to IFRS 9 and IFRS 7 issued in May 2024; the prefatory material acknowledges this international origin. Interaction points and legal cross-references in the Standard include:

Corporations Act 2001: The Accounting Standard is made under section 334 of the Corporations Act 2001 (Accounting Standard heading). That connection places the Standard within the statutory regime governing financial reporting by entities subject to the Act. The Standard does not itself restate enforcement or penalty provisions in the Corporations Act; it operates as a legislative instrument which regulators and courts will treat as the applicable accounting law.
AASB 1057 Application of Australian Accounting Standards: The Application clause states that the amendments apply to entities and financial statements in accordance with the application provisions of AASB 7 and AASB 9 set out in AASB 1057. That means entities must check AASB 1057 to determine whether and how the amendments apply to their particular reporting frameworks and consolidation chains.
AASB 108 Income of and Reporting Periods: Transition and retrospective application are governed by AASB 108. The amended AASB 7 includes a transitional paragraph (44MM) that relieves entities, in the reporting period where they first apply AASB 2024-2, from disclosing information that would otherwise be required by paragraph 28(f) of AASB 108. The Standard therefore interacts with AASB 108’s restatement and retrospective accounting rules (see 7.2.47-7.2.49 for AASB 9 transition treatment cross-referenced to AASB 108).
IFRS/IASB materials: The prefatory material and the text note that these amendments arise from the IASB’s May 2024 amendments. The Standard also includes IASB Implementation Guidance and IASB Bases for Conclusions as available material,useful interpretive references but not themselves Australian law unless adopted.
Payment systems and payments law: The Standard introduces an accounting derecognition election for liabilities settled via electronic payment systems based on operational and risk characteristics (B3.3.8-B3.3.10). While these criteria are functional and operational rather than legal references to payment system legislation, they may interact in practice with payment system rules and payment finality laws administered by central banks or regulators. The Standard does not specify how conflicts between accounting derecognition timing and legal extinguishment under payment systems law are resolved; it sets accounting criteria that preparers must document and apply.

AASB 2024-2 is a discrete amending Standard; the document records what it amends and when. Key elements of the amendment history in the instrument are:

Origin and date of issue: The Standard was made by the Australian Accounting Standards Board and is signed by the Chair, Keith Kendall, dated 29 July 2024 (Accounting Standard header). The prefatory paragraphs state these amendments arise from the IASB’s May 2024 amendments to IFRS 9 and IFRS 7.
Standards amended: The Standard amends AASB 7 Financial Instruments: Disclosures (August 2015) and AASB 9 Financial Instruments (December 2014) (Preface: Standards amended by AASB 2024-2). The amendments are made by inserting and amending specific paragraphs and Application Guidance.
Additions and amendments to AASB 7: The Standard adds paragraphs 20B, 20C, 20D, 44LL and 44MM to AASB 7 and amends paragraphs 11A and 11B. The new paragraphs impose additional disclosure obligations for FVOCI equity instruments and contingent contractual features that are unrelated to basic lending risks, and supply transitional guidance on how to apply the new disclosures (44LL-44MM).
Additions and amendments to AASB 9: The Standard adds paragraphs 7.1.12-7.1.13 (effective date and early application options) and 7.2.47-7.2.49 (transition), and adds Application Guidance paragraphs B3.1.2A, B3.3.8-B3.3.10, B4.1.8A, B4.1.10A, B4.1.16A and B4.1.20A. It also amends paragraphs B4.1.10, B4.1.13, B4.1.14, B4.1.16, B4.1.17, B4.1.20, B4.1.21 and B4.1.23 (with some paragraphs included for ease of reference even where unchanged). The changes clarify derecognition timing in relation to electronic payment systems and expand guidance and examples for SPPI assessments, non-recourse features, and contractually linked tranches.
Effective dates and transition policy: Paragraph 7.1.12 sets the application date for annual reporting periods beginning on or after 1 January 2026, with earlier application permitted. Paragraph 7.1.13 requires disclosure if an entity elects earlier application, and provides the option to apply all amendments at once or only the Application Guidance to Section 4.1 (classification) for an earlier period, provided that choice is disclosed. Transition paragraphs 7.2.47-7.2.49 require retrospective application in accordance with AASB 108, but allow an entity not to restate prior periods if restatement would involve hindsight and specify the balance-sheet and equity adjustment approach if prior periods are not restated. Paragraph 7.2.49 requires before-and-after measurement category and carrying amount disclosure for classes of financial assets that change measurement category on initial application.

The instrument contains no litigation history. It does not cite any judicial decisions, does not purport to record prior litigation interpreting similar amendments, and supplies no cases or tribunal decisions. The text is confined to amendments, application guidance, examples and transition requirements derived from IASB amendments and the AASB’s implementation.

Practitioners should note that the Standard itself supplies new interpretive guidance and examples (for instance Instrument EA and Instrument I in the Application Guidance) but does not record any authoritative judicial construction or administrative tribunal decisions. Any disputes or litigation that arise from the application of these amendments will therefore rely on future case law or regulatory action outside the text of the Standard. Until such decisions exist, entities must apply the Standard’s language, examples and transition rules as written, and rely on contemporaneous regulatory and auditor interpretations.

Because the Standard is made under section 334 of the Corporations Act 2001, challenges to compliance or enforcement would be resolved within the broader legal framework; however, the Standard does not identify precedent or litigated interpretations to guide practitioners. That absence increases the importance of documenting judgments and applying the Standard’s examples and tests explicitly, should accounting positions be reviewed by auditors or regulators.

The Standard introduces several practical traps for preparers and auditors. The following are concrete operational and accounting “gotchas” that arise directly from the text and examples.

All contractually possible scenarios, not probability: Paragraph B4.1.10 requires the entity to determine whether contractual cash flows that could arise over the life of the instrument are SPPI by assessing both before and after possible changes, irrespective of the probability of those changes. That means remote contingent events can affect classification. Preparers may therefore need to model extremely unlikely scenarios to determine whether contractual cash flows are “significantly different” from an otherwise identical instrument without the contingent feature (B4.1.10A). This raises modelling and judgement complexity.
“Significantly different” is a qualitative/quantitative boundary: B4.1.10A allows a qualitative assessment where changes are clearly not significant, but requires quantitative analysis in other cases. The Standard does not give a bright-line test for “significantly different”; entities must document the rationales and thresholds used for qualitative or quantitative analysis. The illustrative Instrument EA shows a scenario where limited basis-point adjustments are not significant, but similar features can be significant (Instrument I, where indexing to a carbon price index removes SPPI).
Interaction with contract drafting and legal interpretation: The SPPI assessment depends on the contractual wording and the set of rights and obligations under the instrument. Entities must coordinate with legal counsel to identify all contingencies and to understand whether features are options, performance clauses or indexing to non-basic variables. The Standard’s look-through requirement for non-recourse features (B4.1.16A, B4.1.17) requires analysis of underlying assets, subordinations, and other contractual arrangements.
Electronic-payment derecognition requires operational evidence and systemic consistency: To deem a liability discharged before settlement date an entity must evidence that it had no practical ability to withdraw or access funds after initiating the payment instruction, and that settlement risk was insignificant (B3.3.8-B3.3.9). Operationally this requires controls, timelines and system logs proving the initiation and the point at which the payment instruction became irrevocable; this will involve treasury, payments operations and potentially third-party payment providers. B3.3.10 requires consistent treatment for all settlements through the same payment system, so selective application within a payment system is not permitted.

Complying with AASB 2024-2 will require project work across accounting, treasury, legal, risk, and IT. Below are practical, source-grounded steps and documentation items aligned to the specific new requirements.

Immediate governance and scoping
- Identify whether your entity is within the scope of AASB 7/AASB 9 per AASB 1057 (Application). If yes, include AASB 2024-2 in your accounting standards update register and assign owners for classification/derecognition and disclosures.
- Note the effective application date (annual reporting periods beginning on or after 1 January 2026) and legislative commencement (31 December 2025). Decide whether to apply early and, if so, whether to apply all amendments or apply only the Application Guidance to Section 4.1 (7.1.13), and plan required disclosures of that election.
Inventory and classification review
- Create an inventory of all financial instruments: loans, bonds, receivables, lease receivables that may be treated as financial instruments, equity instruments designated at FVOCI, and structured finance tranches.
- Tag instruments that include contingent features (for example, ESG-linked interest adjustments, revenue-sharing clauses, indexation to commodity/carbon prices) and instruments settled via electronic payment systems.
SPPI assessment workflow
- For instruments with contingent features, perform a SPPI assessment in line with B4.1.10 and B4.1.10A: consider all contractually possible scenarios, not just likely ones, and document whether a qualitative assessment suffices or a quantitative analysis is necessary.
- Where a qualitative assessment is used, document the factual basis and why changes would not be “significantly different.” Where quantitative analysis is required, run scenario models that compare contractual cash flows with and without the contingent feature, and document thresholds and sensitivity analyses used.
- For non-recourse features and contractually linked instruments, apply the look-through requirements (B4.1.16A, B4.1.17, B4.1.20-B4.1.23). Document the underlying pool identification, the waterfall/subordination structure, and the analysis showing whether tranches’ cash flows represent SPPI.
Electronic payment system derecognition
- Identify payment systems used to settle liabilities. For each system, establish whether the conditions in B3.3.8 can be met consistently: evidence that the payment instruction is irrevocable (no practical ability to withdraw/cancel), that the initiating entity cannot access the cash again, and that settlement risk is insignificant (B3.3.9).

Obtaining a copy of this Accounting Standard

This Standard is available on the AASB website: www.aasb.gov.au.

Australian Accounting Standards Board

PO Box 204

Collins Street West

Victoria 8007

AUSTRALIA

Phone: (03) 9617 7600

E-mail: standard@aasb.gov.au

Website: www.aasb.gov.au

Other enquiries

Phone: (03) 9617 7600

E-mail: standard@aasb.gov.au

This AASB Standard contains IFRS Foundation copyright material. Reproduction within Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use subject to the inclusion of an acknowledgment of the source. Requests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to The Managing Director, Australian Accounting Standards Board, PO Box 204, Collins Street West, Victoria 8007.

All existing rights in this material are reserved outside Australia. Reproduction outside Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use only. Further information and requests for authorisation to reproduce IFRS Foundation copyright material for commercial purposes outside Australia should be addressed to the IFRS Foundation at www.ifrs.org.

ISSN 1036-4803

Preface

Accounting Standard

AASB 2024-2 Amendments to Australian Accounting Standards – Classification and Measurement of Financial Instruments

from page

Objective 5

Application 5

Amendments to AASB 7 5

Amendments to AASB 9 7

COMMENCEMENT OF THE LEGISLATIVE INSTRUMENT 11

aVailable on the AASB website

IASB Implementation guidance – Amendments

IASB Bases for Conclusions – Amendments

Australian Accounting Standard AASB 2024-2 Amendments to Australian Accounting Standards – Classification and Measurement of Financial Instruments is set out on pages 5–11. All the paragraphs have equal authority.

Preface

Standards amended by AASB 2024-2

This Standard makes amendments to AASB 7 Financial Instruments: Disclosures (August 2015) and AASB 9 Financial Instruments (December 2014).

These amendments arise from the issuance of International Financial Reporting Standard Amendments to the Classification and Measurement of Financial Instruments (Amendments to IFRS 9 and IFRS 7) by the International Accounting Standards Board in May 2024.

Main features of this Standard

Main requirements

This Standard amends AASB 7 and AASB 9 in response to feedback from the 2022 Post-implementation Review of the classification and measurement requirements in AASB 9 and related requirements in AASB 7 and the subsequent 2023 Exposure Draft.

This Standard amends requirements related to:

(a) settling financial liabilities using an electronic payment system; and

(b) assessing contractual cash flow characteristics of financial assets with environmental, social and corporate governance (ESG) and similar features.

This Standard also amends disclosure requirements relating to investments in equity instruments designated at fair value through other comprehensive income and adds disclosure requirements for financial instruments with contingent features that do not relate directly to basic lending risks and costs.

Application date

This Standard applies to annual periods beginning on or after 1 January 2026. Earlier application is permitted.

Standards amended by AASB 2024-2

This Standard makes amendments to AASB 7 Financial Instruments: Disclosures (August 2015) and AASB 9 Financial Instruments (December 2014).

Main features of this Standard

Main requirements

This Standard amends requirements related to:

(a) settling financial liabilities using an electronic payment system; and

(b) assessing contractual cash flow characteristics of financial assets with environmental, social and corporate governance (ESG) and similar features.

Application date

This Standard applies to annual periods beginning on or after 1 January 2026. Earlier application is permitted.

Accounting Standard AASB 2024-2

The Australian Accounting Standards Board makes Accounting Standard AASB 2024-2 Amendments to Australian Accounting Standards – Classification and Measurement of Financial Instruments under section 334 of the Corporations Act 2001.

Keith Kendall

Dated 29 July 2024 Chair – AASB

Objective

This Standard amends AASB 7 Financial Instruments: Disclosures (August 2015) and AASB 9 Financial Instruments (December 2014) as a consequence of the issuance of International Financial Reporting Standard Amendments to the Classification and Measurement of Financial Instruments (Amendments to IFRS 9 and IFRS 7) by the International Accounting Standards Board in May 2024.

Application

The amendments set out in this Standard apply to entities and financial statements in accordance with the application of AASB 7 and AASB 9 set out in AASB 1057 Application of Australian Accounting Standards.

This Standard applies to annual reporting periods beginning on or after 1 January 2026. Earlier application is permitted.

This Standard uses underlining, striking out and other typographical material to identify some of the amendments to AASB 7 and AASB 9 in order to make the amendments more understandable. However, the amendments made by this Standard do not include that underlining, striking out or other typographical material. Ellipses (…) are used to help provide the context within which amendments are made and also to indicate text that is not amended.

Amendments to AASB 7

Paragraphs 20B, 20C, 20D, 44LL and 44MM are added. For ease of reading these paragraphs have not been underlined. Paragraphs 11A and 11B are amended. New text is underlined and deleted text is struck through.

Significance of financial instruments for financial position and performance

...

Statement of financial position

...

Investments in equity instruments designated at fair value through other comprehensive income

11A If an entity has designated investments in equity instruments to be measured at fair value through other comprehensive income, as permitted by paragraph 5.7.5 of AASB 9, it shall disclose for each class of investment:
(a) ...
(c) the fair value of each such investment at the end of the reporting period.
(d) ...
(f) the fair value gain or loss presented in other comprehensive income during the period, showing separately the fair value gain or loss related to investments derecognised during the reporting period and the fair value gain or loss related to investments held at the end of the reporting period.
11B If an entity derecognised investments in equity instruments measured at fair value through other comprehensive income during the reporting period, it shall disclose:
(a) ...
(d) any transfers of the cumulative gain or loss within equity during the reporting period related to the investments derecognised during that reporting period.
...

Statement of comprehensive income

Items of income, expense, gains or losses

...
20B An entity shall disclose the information required by paragraph 20C by class of financial assets measured at amortised cost or fair value through other comprehensive income and by class of financial liabilities measured at amortised cost. The entity shall consider how much detail to disclose, the appropriate level of aggregation or disaggregation, and whether users of financial statements need additional explanations to evaluate any quantitative information disclosed.
20C To enable users of financial statements to understand the effect of contractual terms that could change the amount of contractual cash flows based on the occurrence (or non-occurrence) of a contingent event that does not relate directly to changes in basic lending risks and costs (such as the time value of money or credit risk), an entity shall disclose:
(a) a qualitative description of the nature of the contingent event;
(b) quantitative information about the possible changes to contractual cash flows that could result from those contractual terms (for example, the range of possible changes); and
(c) the gross carrying amount of financial assets and the amortised cost of financial liabilities subject to those contractual terms.
20D For example, an entity shall disclose the information required by paragraph 20C for a class of financial liabilities measured at amortised cost whose contractual cash flows change if the entity achieves a reduction in its carbon emissions.
...

Effective date and transition

...
44LL AASB 2024-2 Amendments to Australian Accounting Standards – Classification and Measurement of Financial Instruments, issued in July 2024, added paragraphs 20B, 20C and 20D and amended paragraphs 11A and 11B. An entity shall apply these amendments when it applies the amendments to AASB 9 in accordance with paragraphs 7.1.12–7.1.13 of AASB 9. If an entity elects to apply only the amendments to the Application Guidance to Section 4.1 of AASB 9 (Classification of financial assets) for an earlier period in accordance with paragraph 7.1.13(b) of AASB 9, the entity shall also apply paragraphs 20B, 20C and 20D of this Standard at the same time. In either case, the entity need not provide the disclosures required by the amendments for any period presented before the date of its initial application of the amendments.
44MM In the reporting period in which an entity first applies AASB 2024-2 Amendments to Australian Accounting Standards – Classification and Measurement of Financial Instruments, the entity is not required to disclose the information that would otherwise be required by paragraph 28(f) of AASB 108.

Amendments to AASB 9

Paragraphs 7.1.12–7.1.13 and 7.2.47–7.2.49 and the heading before paragraph 7.2.47 are added. For ease of reading these paragraphs have not been underlined.

7.1 Effective date

...
7.1.12 AASB 2024-2 Amendments to Australian Accounting Standards – Classification and Measurement of Financial Instruments, which amended AASB 7 and AASB 9, issued in July 2024, added paragraphs 7.2.47–7.2.49, B3.1.2A, B3.3.8–B3.3.10, B4.1.8A, B4.1.10A, B4.1.16A and B4.1.20A. It also amended paragraphs B4.1.10, B4.1.13, B4.1.14, B4.1.16, B4.1.17, B4.1.20, B4.1.21 and B4.1.23. An entity shall apply these amendments for annual reporting periods beginning on or after 1 January 2026. Earlier application is permitted.
7.1.13 If an entity elects to apply these amendments for an earlier period, it shall either:
(a) apply all the amendments at the same time and disclose that fact; or
(b) apply only the amendments to the Application Guidance to Section 4.1 of this Standard (Classification of financial assets) for that earlier period and disclose that fact.

7.2 Transition

...

Transition for Amendments to the Classification and Measurement of Financial Instruments

7.2.47 An entity shall apply AASB 2024-2 Amendments to Australian Accounting Standards – Classification and Measurement of Financial Instruments retrospectively, in accordance with AASB 108, except as specified in paragraphs 7.2.48–7.2.49. For the purposes of the requirements in these paragraphs, the date of initial application is the beginning of the annual reporting period in which the entity first applies the amendments.
7.2.48 An entity is not required to restate prior periods to reflect the application of these amendments. An entity may restate prior periods if, and only if, it is possible to do so without the use of hindsight. If an entity does not restate prior periods, it shall recognise the effect of initially applying these amendments as an adjustment to the opening balance of financial assets and financial liabilities and the cumulative effect, if any, as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the date of initial application.
7.2.49 At the date of initial application of the amendments to the Application Guidance to Section 4.1 of this Standard (Classification of financial assets), an entity shall disclose for each class of financial assets that changed measurement category as a result of applying the amendments:
(a) the measurement category and carrying amount determined immediately before the amendments were applied; and
(b) the measurement category and carrying amount determined immediately after the amendments were applied.

Appendix B
Application guidance

Paragraphs B3.1.2A, B3.3.8–B3.3.10, B4.1.8A, B4.1.10A, B4.1.16A and B4.1.20A and the heading before paragraph B3.1.2A are added. Paragraphs B4.1.10, B4.1.13, B4.1.14, B4.1.16, B4.1.17, B4.1.20, B4.1.21 and B4.1.23 are amended. Paragraphs B4.1.15 and B4.1.22 are not amended but are included for ease of reference. New text is underlined and deleted text is struck through.

Recognition and derecognition (Chapter 3)

Initial recognition (Section 3.1)

...

Date of initial recognition or derecognition

B3.1.2A Unless paragraph 3.1.2 applies, an entity shall recognise a financial asset or financial liability on the date on which the entity becomes party to the contractual provisions of the instrument (see paragraph 3.1.1). A financial asset is derecognised on the date on which the contractual rights to the cash flows expire or the asset is transferred (see paragraph 3.2.3). Unless an entity elects to apply paragraph B3.3.8, a financial liability is derecognised on the settlement date, which is the date on which the liability is extinguished because the obligation specified in the contract is discharged or cancelled or expires (see paragraph 3.3.1) or the liability otherwise qualifies for derecognition (see paragraph 3.3.2).
...

Derecognition of financial liabilities (Section 3.3)

...
B3.3.8 Despite the requirement in paragraph B3.1.2A to derecognise a financial liability on the settlement date, when settling a financial liability (or part of a financial liability) in cash using an electronic payment system, an entity is permitted to deem the financial liability (or part of it) to be discharged before the settlement date if, and only if, the entity has initiated a payment instruction that resulted in:
(a) the entity having no practical ability to withdraw, stop or cancel the payment instruction;
(b) the entity having no practical ability to access the cash to be used for settlement as a result of the payment instruction; and
(c) the settlement risk associated with the electronic payment system being insignificant.
B3.3.9 For the purpose of applying paragraph B3.3.8(c), settlement risk associated with an electronic payment system is insignificant if its characteristics are such that completion of the payment instruction follows a standard administrative process and the time between the criteria in paragraphs B3.3.8(a) and (b) being met and the cash being delivered to the counterparty is short. However, settlement risk would not be insignificant if completion of the payment instruction were subject to the entity’s ability to deliver cash on the settlement date.
B3.3.10 An entity that elects to apply paragraph B3.3.8 to the settlement of a financial liability (or part of a financial liability) using an electronic payment system shall apply that paragraph to all settlements made through the same electronic payment system.

Classification (Chapter 4)

Classification of financial assets (Section 4.1)

...

Contractual cash flows that are solely payments of principal and interest on the principal amount outstanding

...
B4.1.8A In assessing whether the contractual cash flows of a financial asset are consistent with a basic lending arrangement, an entity may have to consider the different elements of interest separately. The assessment of interest focuses on what an entity is being compensated for, rather than how much compensation an entity receives. Nonetheless, the amount of compensation an entity receives may indicate that the entity is being compensated for something other than basic lending risks and costs. Contractual cash flows are inconsistent with a basic lending arrangement if they are indexed to a variable that is not a basic lending risk or cost (for example, the value of equity instruments or the price of a commodity) or if they represent a share of the debtor’s revenue or profit, even if such contractual terms are common in the market in which the entity operates.
...

Contractual terms that change the timing or amount of contractual cash flows

B4.1.10 If a financial asset contains a contractual term that could change the timing or amount of contractual cash flows (for example, if the asset can be prepaid before maturity or its term can be extended), the entity must determine whether the contractual cash flows that could arise over the life of the instrument due to that contractual term are solely payments of principal and interest on the principal amount outstanding. To make this determination, the entity must assess the contractual cash flows that could arise both before, and after, the change in contractual cash flows, irrespective of the probability of the change in contractual cash flows occurring. The entity may also need to assess the nature of any contingent event (ie the trigger) that would change the timing or amount of the contractual cash flows. While the nature of the contingent event in itself is not a determinative factor in assessing whether the contractual cash flows are solely payments of principal and interest, it may be an indicator. For example, compare a financial instrument with an interest rate that is reset to a higher rate if the debtor misses a particular number of payments to a financial instrument with an interest rate that is reset to a higher rate if a specified equity index reaches a particular level. It is more likely in the former case that the contractual cash flows over the life of the instrument will be solely payments of principal and interest on the principal amount outstanding because of the relationship between missed payments and an increase in credit risk. In the former case, the nature of the contingent event relates directly to, and the contractual cash flows change in the same direction as, changes in basic lending risks and costs. (See also paragraph B4.1.18.)
B4.1.10A In some cases, a contingent feature gives rise to contractual cash flows that are consistent with a basic lending arrangement both before and after the change in contractual cash flows, but the nature of the contingent event itself does not relate directly to changes in basic lending risks and costs. For example, the interest rate on a loan is adjusted by a specified amount if the debtor achieves a contractually specified reduction in carbon emissions. In such a case, when applying paragraph B4.1.10, the financial asset has contractual cash flows that are solely payments of principal and interest on the principal amount outstanding if, and only if, in all contractually possible scenarios, the contractual cash flows would not be significantly different from the contractual cash flows on a financial instrument with identical contractual terms, but without such a contingent feature. In some circumstances, the entity may be able to make that determination by performing a qualitative assessment; but, in other circumstances, it may be necessary to perform a quantitative assessment. If it is clear, with little or no analysis, that the contractual cash flows are not significantly different, an entity need not perform a detailed assessment.
...
B4.1.13 The following examples illustrate contractual cash flows that are solely payments of principal and interest on the principal amount outstanding. This list of examples is not exhaustive.

Instrument	Analysis
...Instrument EAInstrument EA is a loan with an interest rate that is adjusted every reporting period by a fixed number of basis points if the debtor achieves a contractually specified reduction in carbon emissions during the preceding reporting period.The maximum possible cumulative adjustments would not significantly change the interest rate on the loan.	...The contractual cash flows are solely payments of principal and interest on the principal amount outstanding.The entity considers whether the contractual cash flows that could arise both before and after each change in contractual cash flows are solely payments of principal and interest (see paragraph B4.1.10).If the contingent event of achieving the carbon emissions target occurs, the interest rate is adjusted by a fixed number of basis points, resulting in contractual cash flows that are consistent with a basic lending arrangement. It is only because the nature of the contingent event itself does not relate directly to changes in basic lending risks and costs that the entity cannot conclude – without further assessment – whether the cash flows on the financial asset are solely payments of principal and interest.The entity therefore assesses whether, in all contractually possible scenarios, the contractual cash flows would not be significantly different from the contractual cash flows on a financial instrument with identical contractual terms, but without the contingent feature linked to carbon emissions (see paragraph B4.1.10A).Because any adjustments over the life of the instrument would not result in contractual cash flows that are significantly different, the entity concludes that the loan has contractual cash flows that are solely payments of principal and interest on the principal amount outstanding.

Instrument

Analysis

...Instrument EAInstrument EA is a loan with an interest rate that is adjusted every reporting period by a fixed number of basis points if the debtor achieves a contractually specified reduction in carbon emissions during the preceding reporting period.The maximum possible cumulative adjustments would not significantly change the interest rate on the loan.

...The contractual cash flows are solely payments of principal and interest on the principal amount outstanding.The entity considers whether the contractual cash flows that could arise both before and after each change in contractual cash flows are solely payments of principal and interest (see paragraph B4.1.10).If the contingent event of achieving the carbon emissions target occurs, the interest rate is adjusted by a fixed number of basis points, resulting in contractual cash flows that are consistent with a basic lending arrangement. It is only because the nature of the contingent event itself does not relate directly to changes in basic lending risks and costs that the entity cannot conclude – without further assessment – whether the cash flows on the financial asset are solely payments of principal and interest.The entity therefore assesses whether, in all contractually possible scenarios, the contractual cash flows would not be significantly different from the contractual cash flows on a financial instrument with identical contractual terms, but without the contingent feature linked to carbon emissions (see paragraph B4.1.10A).Because any adjustments over the life of the instrument would not result in contractual cash flows that are significantly different, the entity concludes that the loan has contractual cash flows that are solely payments of principal and interest on the principal amount outstanding.

B4.1.14 The following examples illustrate contractual cash flows that are not solely payments of principal and interest on the principal amount outstanding. This list of examples is not exhaustive.

Instrument	Analysis
...Instrument IInstrument I is a loan with an interest rate that is adjusted every reporting period to track the movements in a market-determined carbon price index during the preceding reporting period.	...The contractual cash flows are not solely payments of principal and interest on the principal amount outstanding.The contractual cash flows are indexed to a variable (the carbon price index), which is not a basic lending risk or cost. The contractual cash flows are therefore inconsistent with a basic lending arrangement (see paragraph B4.1.8A).

B4.1.15 In some cases a financial asset may have contractual cash flows that are described as principal and interest but those cash flows do not represent the payment of principal and interest on the principal amount outstanding as described in paragraphs 4.1.2(b), 4.1.2A(b) and 4.1.3 of this Standard.
B4.1.16 This may be the case if the financial asset represents an investment in particular assets or cash flows and hence the contractual cash flows are not solely payments of principal and interest on the principal amount outstanding. For example, if the contractual terms stipulate that the financial asset’s cash flows increase as more automobiles use a particular toll road, those contractual cash flows are inconsistent with a basic lending arrangement. As a result, the instrument would not satisfy the condition in paragraphs 4.1.2(b) and 4.1.2A(b). This could be the case when a creditor’s claim is limited to specified assets of the debtor or the cash flows from specified assets (for example, a ‘non‑recourse’ financial asset).
B4.1.16A The situation described in paragraph B4.1.15 may also arise if a financial asset has ‘non-recourse’ features. A financial asset has non-recourse features if an entity’s ultimate right to receive cash flows is contractually limited to the cash flows generated by specified assets. In other words, the entity is primarily exposed to the specified assets’ performance risk rather than the debtor’s credit risk. For example, a creditor’s ultimate right to receive cash flows may be contractually limited to the cash flows generated by specified assets of a structured entity.
B4.1.17 However, the fact that a financial asset is has non-recourse features does not in itself necessarily preclude the financial asset from meeting the condition in paragraphs 4.1.2(b) and 4.1.2A(b). In such situations, the creditor is required to assess (‘look through to’) the link between the particular underlying assets or cash flows and the contractual cash flows of the financial asset being classified to determine whether those the contractual cash flows of the financial asset being classified are payments of principal and interest on the principal amount outstanding. An entity shall also consider how this link is affected by other contractual arrangements, such as subordinated debt or equity instruments issued by the debtor. If the terms of the financial asset give rise to any other cash flows or limit the cash flows in a manner inconsistent with payments representing principal and interest, the financial asset does not meet the condition in paragraphs 4.1.2(b) and 4.1.2A(b). Whether the underlying assets are financial assets or non-financial assets does not in itself affect this assessment.
...

Contractually linked instruments

B4.1.20 In some types of transactions with non-recourse features, an issuer may prioritise payments to the holders of financial assets using multiple contractually linked instruments that create concentrations of credit risk (tranches). Each tranche has a subordination ranking that specifies the order in which any cash flows generated by the issuer from the underlying pool of financial instruments are allocated to the tranche. The prioritisation of payments to the holders of these tranches is established through a waterfall payment structure that creates concentrations of credit risk and results in a disproportionate allocation of cash shortfalls from the underlying pool between the tranches. In such situations, the holders of a tranche have the right to payments of principal and interest on the principal amount outstanding only if the issuer generates sufficient cash flows to satisfy higher‑ranking tranches. In these types of transactions, the holders of a tranche apply paragraphs B4.1.21–B4.1.26 instead of paragraph B4.1.17.
B4.1.20A Some transactions that may contain multiple debt instruments and appear to have the characteristics described in paragraph B4.1.20 are, in fact, lending arrangements that are structured to provide enhanced credit protection to a creditor (or group of creditors). For example, a structured entity may be set up to hold the underlying assets that will generate the cash flows to repay the creditor. The structured entity issues senior and junior debt instruments. The creditor holds the senior debt instrument and the entity sponsoring the structured entity that holds the junior debt instrument has no practical ability to sell the junior instrument without the senior debt instrument becoming payable. The holders of such debt instruments apply paragraphs B4.1.7–B4.1.19 instead of paragraphs B4.1.21–B4.1.26.
B4.1.21 In such transactions that contain contractually linked instruments, as described in paragraph B4.1.20, a tranche has cash flow characteristics that are payments of principal and interest on the principal amount outstanding only if:
(a) ...
B4.1.22 An entity must look through until it can identify the underlying pool of instruments that are creating (instead of passing through) the cash flows. This is the underlying pool of financial instruments.
B4.1.23 The underlying pool must contain one or more instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding. For the purposes of this assessment, the underlying pool can include financial instruments that are not within the scope of the classification requirements (see Section 4.1) but that have contractual cash flows that are equivalent to solely payments of principal and interest on the principal amount outstanding – for example, some lease receivables. However, lease receivables that are subject to residual value risk, or that comprise variable lease payments that are indexed to a variable that is not a basic lending risk or cost (for example, a market rental rate), do not have contractual cash flows that are equivalent to solely payments of principal and interest on the principal amount outstanding.

Commencement of the legislative instrument

For legal purposes, this legislative instrument commences on 31 December 2025.

Obtaining a copy of this Accounting Stan Obtaining a copy of this Accounting Standard