Amendments to IFRS 9 and IFRS 7 – Classification and Measurement of Financial Instruments (2026)

The amendments to IFRS 9 and IFRS 7, effective for annual periods beginning on or after 1 January 2026, primarily address two recurring points of diversity in practice: the classification of financial assets with contingent features — including ESG-linked interest rate adjustments — and the timing of recognition and derecognition for financial assets and liabilities settled through electronic payment systems.

On classification, the amendment clarifies that a contractual cash flow characteristic linked to an ESG target, such as a reduced interest rate for meeting a sustainability metric, does not automatically fail the solely-payments-of-principal-and-interest test, provided the contingent event is not itself a basic lending risk factor and the effect of the feature is not more than de minimis in most scenarios. This matters directly for the growing volume of sustainability-linked loans and bonds being issued and held.

On settlement mechanics, the amendment permits an accounting policy choice to derecognise a financial liability before the settlement date where cash is transferred using an electronic payment system that meets specified criteria — closing a gap that had produced inconsistent treatment of same-day and near-instant payment rails across different reporting entities.

Key actions to take now

• Review any sustainability-linked debt instruments against the updated SPPI guidance
• Confirm whether an accounting policy choice is needed for electronic settlement derecognition
• Update instrument classification memos ahead of the 2026 effective date
• Align treasury and finance on which payment rails qualify under the new criteria