Brussels, 25/07/2014 (Agence Europe) - The International Accounting Standards Board (IASB) unveiled a new draft version of International Financial Reporting Standard, IFRS 9.
The writedown aspects of the standards are based on a depreciation model based on expected losses rather than simply actual losses. This means that banks will have to make provisions over twelve months for all their financial portfolios and if the default risk for any product or debt rises, the provisions must be extended to the product or debt's full lifetime. In this way, banks will not wait too long to protect themselves from risk.
IFRS 9 will not apply until 1 January 2018, so the IASB wants to set up a stakeholder support group during the transition period. Meanwhile, the European Commission will unveil draft legislation to transpose IFRS 9 into EU accounting rules. “The Commission welcomes the publication by the International Accounting Standards Board of its long-awaited standard on financial instruments (IFRS 9). It responds to numerous calls from the G20 and the Financial Stability Board to strengthen the rules governing banks' loan losses provisions in particular. The Commission will now examine that new standard in the framework of the EU endorsement process. Only when approved by the EU Commission, after consulting Member States and the European Parliament, will this new standard become part of EU law”, said the Commission in a statement.
At the end of November, the Ecofin Council called for flexibility when transposing the IFRS 9 rules so that accounting standards can be tailored to suit the specific situation in Europe, following the proposals made by a group of experts led by the former head of the EIB, Philippe Maystadt of Belgium (see EUROPE 10965). (MB)