IFRS 9 | KPMG | LU

IFRS for Banks

IFRS for Banks

KPMG is committed to provide long term support to our clients as they tackle challenges raised by the upcoming new standard on financial instruments.

KPMG is committed to provide long term support to our clients as they tackle challenges...

Extensive new requirements force all entities to devote significant time and effort in preparation for the application of IFRS 9. As financial institutions will be impacted heaviest, they need to focus their attention on the potential consequences of the new standard in order to adequately manage its impact especially on the bottom line and capital requirements.

IASB issued the new standard on financial instruments already in June 2014. Eventhough IFRS 9 has not yet been endorsed in the European Union (endorsement expected in the second half of 2016) the Commission de Surveillence du Secteur Financier issued already in its Circular 15/621 a reminder on the expected effective date of the standard being January 1, 2018. All financial institutions and any other entities subject to regulatory reporting should therefore be ready to apply the provisions of IFRS 9 in their FINREP reporting for January 2018.

The new standard on financial instruments reshapes the accounting and disclosure requirements related to the following areas:

  • Classification and Measurement - amortized cost accounting will only be allowed in limited circumstances, which created the need to improve processes and review all financial instruments held.
  • Impairment - Expected Credit Loss Model replaces the provisioning methodology of IAS 39, which will require significantly more data than is currently captured by most entities.
  • Hedge Accounting - requirements become more dependent on entity's risk management, which creates opportunities for a more common use of hedge accounting.

A wave of new requirements for the accounting of financial instruments puts a great strain especially on financial institutions. Challenges arise in all key areas of the banks operations including product development, investment making, risk management, IT infrastructure, accounting and budgeting.

IFRS 9 affects not only the entire balance sheet of financial institutions, but also may have significant effect on the net results of any entity heavily involved in financial instruments. A comprehensive approach to the adoption of the new standard is well advised in order to adequately identify, quantify and manage the impact of IFRS 9, not only for the accounting bottom line, but also in terms of regulatory reporting and capital requirements.

Depending on the complexity of operations, effective measures to meet the requirements, especially in terms of IT, might need significant outlays, time and effort. KPMG Luxembourg and its global network have the capacity to assist any entity in addressing the challenges which might arise in IFRS 9 implementation. KPMG provides a full package of support to its clients starting from accounting advisory, gap analysis, impact assessment, through advisory on implementation of particular solutions as well as proprietary IT solution for impairment calculation under IFRS 9 called Global Credit Loss Accounting Solution - gCLAS

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