The Institute has responded to the International Accounting Standards Board’s (IASB) request for information relating to IFRS 9 Financial Instruments impairment requirements.
The IASB’s request for information begins the post-implementation review of IFRS 9’s impairment requirements and this allows the IASB to assess whether the effects of applying the new requirements on users of financial statements, preparers, auditors and regulators are those the IASB intended when it developed the requirements. IFRS 9 has been effective for annual periods beginning on or after 1 January 2018.
Some of the key points made by the Financial Reporting Technical Committee on behalf of the Institute include;
- Broadly speaking, the impairment model in IFRS 9 is working as intended and produces relevant and reliable information.
- There are some areas where users of the standard would benefit from additional guidance and educational material (for example- the definition of credit losses, calculation of expected credit losses on inter-group loans which are repayable on demand and interaction of impairment with other IFRS standards).
- There is a high cost of applying the impairment requirements to intercompany loans, often with limited benefit due to investors often placing greater reliance on the consolidated financial statements.
- The simplified approach for trade receivables, contract assets and lease receivables is working well in practice and is widely used.
- A recommendation that the IASB provide guidance regarding minimum disclosure requirements in IFRS 7 to achieve greater consistency in the information provided.
- The increasing prevalence of questions arising in relation to ESG risk when applying impairment requirements and the need for more guidance and educational material.