Deloitte comments on the IASB’s impairment of financial assets proposals
7 March 2013
The new exposure draft, Financial Instruments: Expected Credit Losses from the International Accounting Standards Board (IASB) takes its place as part of the wider reforms to financial instruments accounting which aim to finalise the overall standard, IFRS 9. Deloitte supports the efforts of both the IASB and US Financial Accounting Standards Board (FASB) to publish their respective proposals on rules for impairment of financial assets with the aim of achieving a globally converged solution.
Andrew Spooner, lead IFRS financial instruments partner at business advisory firm, Deloitte, said:
“The new exposure draft will enable organisations and banks, in particular, to better align the management of their credit risk with their financial statements. This is because the proposed expected loss model relies on more forward-looking information, meaning that any losses would be accounted for earlier than happens under the current rules.
“While the G20 has called upon global standard setters to establish a single set of international accounting rules on impairment, there are still technical differences between the IASB’s and the US FASB’s proposals. In spite of earlier efforts by both to produce common rules, the proposals differ which could lead to material differences in the numbers if the current proposals are adopted. In turn, this could have unintentional capital implications. We expect the transition costs in implementing the new model to be significant, particularly for banks.”
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