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IFRS 9 impairment survey 2011 | Whitepaper

How global banks are responding to the financial crisis accounting reforms

IFRS 9 impairment surveyOver the past few years significant effort has gone into the development of an entirely new financial instrument accounting standard. As we approach the finalisation of the standard that will replace IAS 39 within International Financial Reporting Standards (IFRS), a picture is emerging of the final body of rules that will come into force over the coming years.

In light of this, the Global Financial Services Industry practice has conducted this survey, gathering the responses from 56 global banking groups, including responses from 7 of the top 10 global banking groups measured by total assets. It aims to help banking clients better understand the impact of the proposed rules as well as, raise awareness of the size and scale of the impact of the proposed changes. Key survey findings include:

Nature and timing of changing rules

  • Respondents expected the final impairment rules to be based on an expected loss approach, however, many were not convinced that this would enhance the overall usefulness of financial statements

Awareness of changes and impact assessment

  • Respondents’ awareness of issues at board level were mixed
  • Respondents were typically most concerned with the effect on capital and the transition of accounting reserves to the new requirements
  • Respondents’ views were mixed on whether the introduction of an expected loss model would affect the way lending is priced

Implementation planning and progress

  • Most banks aim to implement IFRS 9 in parallel with their implementation of Basel III or other credit risk and finance transformation initiatives
  • The expected spend to implement varied widely from under EUR 10m to over EUR 100m

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