What is IFRS 9 and how does it impact financial reporting?

What is IFRS 9 and how does it impact financial reporting?

IFRS 9 is an international financial reporting standard that addresses the accounting for financial instruments. It impacts financial reporting by changing how companies classify and measure financial assets and liabilities.

What are the key changes introduced by IFRS 9?

The key changes include a new classification and measurement approach for financial assets, a forward-looking expected credit loss model for impairment, and new hedge accounting requirements.

How does IFRS 9 affect banks specifically?

For banks, IFRS 9 affects how they recognize credit losses, requiring them to estimate expected losses rather than incurred losses, which can lead to earlier recognition of losses.

Can you explain the expected credit loss model?

The expected credit loss model requires entities to recognize an allowance for expected credit losses over the life of the financial asset, rather than waiting for a loss event to occur.