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iGAAP Alert: February 2011

Further proposals on impairment of financial assets (IFRS 9) and ED on offsetting of financial assets and liabilities

iGAAP Alert: November 2010

Background

The IASB has been making big strides in developing IFRS 9 (which will eventually replace IAS 39). It has already issued: final guidance on classification and measurement of both financial assets and financial liabilities; two exposure drafts on the general hedge accounting model and impairment. The derecognition guidance was carried over from IAS 39. Once the two EDs are finalised, this should bring us to a nearly complete standard in the second half of 2011. An ED on portfolio hedging will be issued at a later stage; this might affect timing of endorsement by the EU.

This iGAAP Alert discusses the two most recent proposals:

  • a Supplement to the ED on impairment (the ED was issued in November 2009 and the Supplement in January 2011) that will flow into IFRS 9; and
  • the ED of a standard on offsetting of financial assets and financial liabilities (issued in January 2011).

The Supplement aims to develop and to demonstrate the ED’s proposals on how to apply the expected loss impairment model to a certain type of assets, i.e. open portfolios of assets. In summary, when the asset is in the ‘good book’ the expected impairment allowance and losses are built over time; however, once the asset falls into the ‘bad book’ the impairment is recognised immediately. The proposals of the ED and the Supplement are quite complicated and require careful studying.

The good news is that the offsetting requirements in the offsetting ED have not really changed those currently in IAS 32, albeit there are some extensive disclosure requirements.

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Download  iGAAP Alert: February (PDF)

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