IFRS 9 Amendments: Settlement-Date Accounting and the End of Distorted Liquidity Positions

For treasury and finance teams, this isn’t merely an accounting tweak. It changes how liabilities, assets, and liquidity are presented at reporting cut-offs, with considerable implications for system configuration and investor perception.

What has changed?

Under past practice, liabilities typically were removed from the balance sheet as soon as payment instructions were sent to a bank. Under the updated standard, such derecognition is no longer permitted unless settlement has actually occurred and funds are in the hands of the counterparty.

This change aligns accounting more faithfully with economic reality: until settlement occurs, the liability remains and cannot be considered discharged.

In SAP, liabilities are often cleared at the payment run step, with postings to a cash-in-transit (“CIT”) account.

Example: SAP F110 + CIT vs Settlement-Date

Impact: Under the old method, liabilities disappeared prematurely and cash was overstated, creating distorted liquidity positions. Under IFRS 9, derecognition only happens when settlement is confirmed by the bank.

The same timing challenge applies in in-house bank (IHB) scenarios, where intercompany positions are often cleared in SAP before external settlement has actually taken place.

This change aligns accounting more faithfully with economic reality: until settlement occurs, the liability remains and cannot be considered discharged.

Why the IASB stepped in

The previous method often led to distorted liquidity positions. Liquidity, as shown on the face of the financials, could appear stronger than warranted while liabilities looked lower. The IASB’s concern lay in classification, timing, and how external users interpret financial statements.

The effect can be seen in the example below:

In the table above, we can see that the economic position under both approaches remains identical, the supplier is unpaid and the cash is still in the bank. The difference lies in the presentation. Under instruction-date accounting, liabilities appear lower, making liquidity look stronger than it truly is. Under settlement-date accounting, liabilities remain on the balance sheet until cash is received by the counterparty. This provides a more faithful representation of the company’s financial position and addresses the IASB’s concern that inconsistent reporting reduces comparability and distorts how investors perceive liquidity and risk.

The Exemption

For financial liabilities only, IFRS 9 allows an optional policy election, companies may derecognise at the instruction date but only for payment systems (e.g. CHAPS or SEPA) that meet stringent criteria. Derecognition at instruction date is permitted only if:

• the payment instruction is irrevocable
• the entity cannot access or redirect the cash after initiation
• settlement risk is insignificant
• settlement is expected to occur within a very short timeframe

If this exemption is elected, it must be applied consistently within that payment system. Companies can choose different approaches for different systems for example, applying the exemption to SEPA but not to CHAPS.

While this option can provide operational relief and reduce the need for immediate system changes, it may also increase configuration complexity where multiple payment systems are used.

For example in SAP this choice needs to be reflected in payment method configuration, house bank integration, and clearing logic. While the exemption may reduce the need for immediate system changes, it can add a high level of complexity where multiple payment systems are used. The exemption also requires clear disclosure under IFRS 7.

What companies should do now

The degree of impact will vary. Entities with high volumes of electronic payments, in-house bank models, or complex treasury workflows are likely to be most affected.

For SAP users, the priority is to map where liabilities are currently being derecognised before settlement and focus on updating configuration in the following key system areas:

• Payment run (F110): Review clearing logic and postings to CIT. Ensure liabilities remain in AP until the bank statement import (EBS) confirms settlement.
• Bank statement processing (EBS): Confirm settlement recognition logic, including how postings flow from house banks to AP and cash accounts.
• Cash and liquidity reporting (Fiori apps): Validate whether Cash Position and Liquidity Forecast details reflect settlement date logic and align with IFRS 9 reporting.
• Payment method & House Bank configuration: If the IFRS 9 exemption is applied, ensure configuration is consistent at the payment system level, and correctly applied to exemptions only.
• Accounting configuration: Review and update how cash-in-transit (CIT) postings are set up in SAP.

Aligning SAP configuration across these areas is essential to ensure management reporting and statutory reporting remain consistent and to avoid distorted liquidity views at reporting cut-offs.

For many companies, these changes are not just a simple adjustment to accounting treatment they will require extensive configuration updates across SAP treasury and banking processes. Delaying the review could leave year-end reporting out of step with IFRS 9.

How we can help

These amendments reshape how liquidity and financial strength are communicated to stakeholders. With the effective date approaching, companies should act pre-emptively: assess exposure, evaluate options, and prepare systems and processes for change. Our team combines IFRS expertise with deep SAP treasury and technology knowledge, helping organizations translate regulatory change into practical implementation. To explore how the IFRS 9 amendments may affect your reporting, SAP configuration, or liquidity metrics, please get in touch with our advisory team, Jordan James, or Deepak Aggarwal.