FRC welcomes the report by the taskforce on disclosures about Expected Credit Losses

Nov 30, 2018
The Financial Reporting Council (FRC) welcomes the publication of the report by the Taskforce on Disclosures about Expected Credit Losses (Taskforce). 

The expected credit losses (ECL) impairment model introduced by the new accounting standard IFRS 9 Financial instruments will have a significant effect on how banks calculate loan loss provisions.  Given the complexity of these models and the high degree of management judgement involved in these calculations, high-quality disclosures are an essential element of successfully implementing this new requirement.  These disclosures should, among other things, set out clearly the accounting judgments exercised by management and provide information about the estimation uncertainty inherent in the calculations. 

In order to facilitate the provision of high-quality disclosures, the FRC together with the PRA and FCA sponsored the Taskforce, which comprises preparers and users, to build on the existing disclosures in IFRS 7 and develop further guidance on high-quality disclosures about ECL.  The report acknowledges that some of the recommendations are stretching and may require a number of years to be implemented.

The FRC encourages all banks, building societies and credit institutions to consider the recommendation of the Taskforce when preparing their disclosures in the forthcoming reporting season.

Report of Taskforce on Disclosures about Expected Credit Losses (PDF)
Co-chairs letter to CEOs of PRA, FCA, FRC (PDF)

Source: FRC