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Can IFRS 9 – Financial Instruments impact your Company’s Existing Leverage Ratio

IFRS 9, also known as the financial instruments or IAS 39 is published by international accounting board. In IFRS 9, important topics include classification and measurement of financial instruments, impairment of financial assets and hedge accounting. It is one of the standard, but there are more standards like IFRS 15 & IFRS 16, which are included if you are looking for detailed IFRS Certification Course . Contetra provides in-depth knowledge along with study material and 2 mock exams before the main exam. If you are interested in IFRS Course In Mumbai then visit : https://contetra.com/diplom

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Can IFRS 9 – Financial Instruments impact your Company’s Existing Leverage Ratio

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  1. Can IFRS 9 – Financial Instruments Impact Your Company’s Existing Leverage Ratio?

  2. Content

  3. Introduction • While it is a general perception in the financial world that IFRS 9 – Financial Instruments could result in volatility in reported income of many companies (on account of assets being measured at fair value, and resulting change being reflected in the statement of profit and loss) – there is another significant impact of this standard on the “leverage” ratio on the financial statements of many companies.

  4. What is Leverage and Leverage Ratio? • In business terms, leverage means debt i.e., external fund (Borrowing) can be “leveraged” to increase the returns of a company. One of the most important leverage indicators (the Debt-to-Equity ratio) essentially shows the proportion of a company’s funds sourced from debt and how much are sourced through owners’ equity. Debt/Equity = Long term borrowings + Short term borrowings Total Shareholders’ Equty

  5. What is an Optimal Debt-to-Equity Ratio?

  6. How One of the Biggest Indian Conglomerates Aspires to Become a Debt-free Company! • In a bold (and boastful?) move, Reliance Industries Ltd. chairman Mukesh Ambani declared in July 2020 that RIL had ambitions to become Net Debt-free! Which essentially meant the company had enough cash and marketable securities to pay off its existing debt. • To that end, the company repaid more than USD 21 Billion of its debt after raising over USD 44.4 billion of capital (including noteworthy investors like Facebook and Google’s acquisition of around 18% stake in Jio worth USD 10.2 billion), which was the largest ever capital raised by any company in a year globally. • This resulted in a decrease of more than 35% in the debt-to-equity ratio from 0.65 in March 2020 to 0.41 in March 2021!

  7. Conclusion IFRS 9, also known as the financial instruments or IAS 39 is published by international accounting board. In IFRS 9, important topics include classification and measurement of financial instruments, impairment of financial assets and hedge accounting. It is one of the standard, but there are more standards like IFRS 15 & IFRS 16, which are included if you are looking for detailed IFRS Certification Course . Contetra provides in-depth knowledge along with study material and 2 mock exams before the main exam. If you are interested in IFRS Course In Mumbai then visit : https://contetra.com/diploma-in-ifrs-training/

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