This newsletter looks at IFRS and regulatory matters affecting accounting for banks.
The Bank Statement is KPMG’s quarterly banking newsletter.
It provides updates on IFRS developments that directly impact banks, and considers the potential accounting implications of regulatory requirements.
Many implementation projects for IFRS 9 Financial Instruments focus on the new expected credit loss model. However, banks shouldn’t underestimate the impact of other changes – in particular, the judgement required, and the potential complexities involved, in assessing how a financial asset should be classified.
We look at some of the complexities of performing the ‘solely payment of principal and interest’ (SPPI) analysis, used to assess whether a basic lending arrangement exists.
“Just asserting that a financial asset feels like a basic lending arrangement does not mean that it meets the contractual cash flows test in IFRS 9.”
Reinhard Klemmer, Financial Services, KPMG in Singapore
The introduction of the regulatory leverage ratio is encouraging banks to consider the size of their balance sheet. This may involve a review of whether client money should be recognised on-balance sheet.
The accounting analysis is usually very specific to the particular facts and circumstances, so we highlight some of the key factors to consider.
Also in this issue, we report on: