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Countdown to IFRS 9

How should the banks be preparing for IFRS 9? Zsuzsanna Schiff and Philippa Kelly take a look

While banks get ready for IFRS 9, the Enhanced Disclosure Task Force (EDTF) has been asked to assess what information the market might need now – and in the run-up to its application – in order to understand what the numbers mean, and to avoid panic or overreaction at impairment numbers that will inevitably be much larger than they previously were.

Following the financial crisis and consistent with a widely shared view that the impairment methodologies should incorporate a broader range of credit information, the International Accounting Standards Board introduced a new credit impairment approach in IFRS 9: Financial Instruments issued in 2014 to replace IAS 39 Financial Instruments: Recognition and Measurement. The US Financial Accounting Standards Board (FASB) has substantially completed re-deliberations on its credit losses standard with issuance of a new standard expected in the first quarter of 2016. Although there are some key differences (namely in the timing of recognition of lifetimes losses), both are based on the concept of measurement of expected credit losses (ECL).