Written by Steffen Müller
The International Accounting Standards Board (IASB) has issued the final version of the new standard on financial instruments accounting - IFRS 9 Financial Instruments.
The issuing completes the IFRS 9 project that was launched in 2008 in response to the financial crisis. The final version of the standard includes revised guidance on the classification and measurement of financial assets, a new impairment model and introduces a reformed approach to hedge accounting.
"The reforms introduced by IFRS 9 are much needed improvements to the reporting of financial instruments, are consistent with requests from the G20 and will enhance investor confidence in banks' balance sheets and the financial system as a whole," IASB chairman Hans Hoogervorst said.
Regulators, professional bodies and firms welcomed the IASB's announcement.
Melanie McLaren, executive director of codes and standards of the Financial Reporting Council (FRC) called the new standards a "package of improvements" and stated: "The FRC is pleased that an improved standard has now been issued and will be working to influence its swift endorsement in Europe."
The Institute of Chartered Accountants in England and Wales (ICAEW) as well as Deloitte lead financial instruments partner Andrew Spooner called the completion of IFRS 9 "a milestone" for the accounting profession.
The stakeholders are concordantly expecting that the new standard will have a big impact on the financial service sector.
"IFRS will affect all sectors though the introduction of an expected loss model for loan loss provisioning, but will impact banks most," Deloitte's Spooner commented.
KPMG global IFRS financial instruments leader Chris Spall said: "The new standard is going to have a massive impact on how banks account for credit losses on their loan portfolios."
Head of ICAEW financial services faculty Iain Coke commented that banks will need to consider the impact of the new standard on their regulatory capital, "taking into account the results of regulators' stress-testing and asset quality review exercises."
According to ICAEW head of financial reporting faculty Nigel Sleigh-Johnson, IFRS 9 will also have an impact beyond the financial services sector:
"All companies holding financial assets such as loans and bonds, trade debtors and lease receivables will have to consider the new requirements and there will be considerable costs involved in meeting them."
However, the comments on the finished standard were not thoroughly positive. ICAEW and KPMG said that the IASB and the US Financial Accounting Standards Board (FASB) were not able to converge US GAAP and IFRS.
According to the ICAEW, the publication of the new requirements firmly marks the end of the effort to converge standards in this area.
"It is regrettable that the IASB and the FASB have been unable to agree on all aspects of their models" ICAEW's Sleigh-Johnson said and KPMG's Spall commented: "Having different rules under US GAAP and IFRS will mean a lack of comparability for investors between the results of banks reporting under the different frameworks, and increased costs for those banks that have to prepare figures under both accounting frameworks."
The comments on the IFRS 9 issuing also renewed concerns about the transition period and the effective date that is scheduled for 1 January 2018.
Spall commented: "Companies need to think about when they plan to adopt the new standard. Many banks may need the whole three and a half years up to 2018 to prepare for adoption of the expected credit loss requirements. "
"In many jurisdictions, including the European Union, companies will not be able to adopt the new standard until it is legally endorsed or permitted by regulators. Given the significance of the standard to the financial services sector, the road to endorsement may be longer and more winding than usual," he continued.
"Putting the new requirements into practice by the effective date will be a challenge. 2018 is not far away," also Deloitte's Spooner warned.
Earlier this month, a Deloitte bank survey revealed that the implementation of IFRS 9 is lagging with a third of surveyed banks had yet not started.
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