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The FSB published an EDTF report on the Impact of Expected Credit Loss Approaches on Bank Risk Disclosures, to consider changes banks will need to make to their financial disclosures with the implementation of a new ECL. The IASB issued a new credit impairment approach, IFRS 9 Financial Instruments (IFRS 9), in 2014 to replace IAS 39 Financial Instruments: Recognition and Measurement (IAS 39). The FASB has substantially completed re-deliberations on its credit losses standard with the issuance of a new standard expected in the first quarter of 2016. Although the new approaches are expected to differ in some details, both are based on the concept of measurement of ECL. The EDTF report concludes that for many banks significant changes to systems and processes may be required, which will require substantial time and resources to deliver. It also concludes that some banks will need to develop and enhance governance over the recognition and measurement of credit losses, particularly to develop capability to make informed judgements about the use of forward-looking information.
At its meeting in September 2015 the FSB Plenary noted ongoing work to promote consistent and comparable application of the new accounting standards for expected credit loss, including the work by the EDTF on such disclosures and work by the Basel Committee on Banking Supervision to develop guidance to support IFRS 9. It called on the IAASB to develop further audit guidance on this standard. The Plenary noted the importance of the IASB completing its standard for insurance contracts as a high priority. The publication of these reports will make an important contribution to consistent and comparable application of bank financial disclosures.
The FSB also published the EDTF’s position on the disclosure of emergency liquidity assistance. This accepts that EDTF Recommendation 19 and Figure 5 could be met without differentiating between assets which are being used to obtain central bank funding and assets which, although allocated for such use, are not currently used, including for the provision of emergency liquidity assistance.
Full report “Impact of Expected Credit Loss Approaches on Bank Risk Disclosures”
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