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FEE supports a swift endorsement of IFRS 9 in the EU, and endorses international solutions to address issues arising from the non-alignment of the effective date of IFRS 9 and the future standard on insurance contracts for institutions with significant insurance activities. Preparers will need time to implement the new requirements but will hesitate to begin the process until uncertainty surrounding the endorsement is resolved.
Additional answers to some of the questions:
What is being done to address the concerns of the insurance sector?
While the majority of constituents believe that IFRS 9 is a better standard to account for financial instruments and are asking for its swift endorsement, they acknowledge the concerns raised by the insurance sector. An international solution is preferable. Unilateral European action would constitute a de facto carve-out from full IFRS which should be avoided as they do not come without consequences. Any EU-specific solution should only be considered as a last resort if the IASB fails to deliver a workable solution.
The IASB discussed and agreed on two alternative solutions to address the issue. The IASB published an ED on this matter in December 20156 and a final proposal is expected around mid-2016. Delaying the endorsement process however would be detrimental for the banking sector as the banks will not have adequate time to properly implement the new requirements.
Why has there been no comprehensive impact assessment on the expected effects of IFRS 9?
The simple answer is that no one has yet implemented the standard, and, due to the complexity of the financial instruments covered by IFRS 9’s scope, it is very difficult to predict outcomes. Implementation involves significant investment of time and resources, and consequently concerned stakeholders are reluctant to begin implementation before the standard has been fully endorsed.
Having said that, the standard has gone through an extensive standard-setting process governed by continuous expert advice and feedback, both from academics as well as practitioners with practical understanding of the sector and financial products concerned. This has ensured that the proposed standard should appropriately address identified challenges and limitations, and constitutes an apt compromise between a conceptually pure model and operational feasible standard.