On the 15th April the PRA wrote to the CFO’s of the top seven banks to give their initial opinions on the implementation of the new impairment requirements under IFRS 9. As expected for such a substantial subject, the findings, based on their written auditor reporting work, are varied in nature. Through discussion with a range of lenders and client engagements, we see many of the issues raised by the PRA. However, there are also some omissions that we expected to see.
Based on our experience, there are a number of aspects that are common to every IFRS 9 project – they include:The solution you thought you would arrive with at the start is not actually the solution you end up with IFRS 9 is a vastly complex challenge and whilst simplifications can be applied, they need to be relevant and justifiable for your organisation.
In response to the financial crisis of 2007-2008, the International Accounting Standards Board (IASB) is replacing the “incurred loss” model for loan provisioning (IAS39) with an “expected loss” model for loan provisioning (IFRS 9).