Third global IFRS banking survey - Still far from land? | Whitepaper


Third global IFRS banking survey - Still far from land?Banks’ financial reporting, particularly in relation to financial instruments, continues to be the subject of intense scrutiny by investors, regulators and the financial press. It is also a matter of heated debate: for practical and intellectual reasons, stakeholders have different and sometimes opposing views on what a good accounting treatment should look like.

This report captures banks’ current views on the International Accounting Standards Board’s (IASB) new standards and proposed changes. To achieve this, Deloitte surveyed 70 banks from across the world, including 19 Global Systemically Important Financial Institutions (G-SIFIs).

The survey asked questions about the interaction between the IASB and Financial Accounting Standards Board’s (FASB) proposals, and how probable convergence between them is. The survey also asked how banks would like to see IFRS 9 develop with respect to impairment, classification and measurement, and hedge accounting and what impact the new standards on fair value measurement will have.

The survey found most banks in the sample consider the IASB and FASB are no longer on track to converge, despite the fact that previous survey results found significant support amongst banks for the convergence process. The two standard-setting bodies now appear to favour different expected loss models for impairment.

Responses from the banks (principally IFRS filers), suggests the IASB’s likely impairment model is generally preferred by the industry. Yet despite significant support for the proposals, which banks think will increase their level of impairment provision, banks are putting their implementation efforts on standby as the process of completing changes to financial instruments accounting is subject to delay.

There is growing uncertainty about the outcome of financial instruments accounting change: compared to previous survey results, more banks consider that the new requirements cannot be implemented in a way that will increase comparability between banks.

The accounting for banks’ liquidity portfolios continues to be an issue in the light of the recent proposed amendments to classification and measurement. As with impairment, these proposed reforms highlight the pressure the IASB may come under, not least because the accounting numbers are often also used for regulatory purposes. Consensus is building that the capital and pricing impacts of accounting changes around impairment, debit valuation adjustments (DVAs) and liquidity portfolios will be significant.

A majority want to see changes in macro hedge accounting, but a third do not and of these a third want to retain the European Union (EU) carve out. This lack of consensus suggests the IASB will continue to face opposition when it further develops changes to macro hedge accounting.

This whitepaper is available in PDF format only.

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