IASB Confirms IFRS 9 Impairment Effective, Plans Targeted Improvements

by | Jul 6, 2024 | Accounting, Income Tax, Tech News

The International Accounting Standards Board (IASB) announced the completion of its Post-implementation Review (PIR) concerning the impairment requirements within IFRS 9 / SFRS(I) 9 Financial Instruments. The review assessed whether the practical application of these requirements aligns with the IASB’s original objectives.

Based on extensive stakeholder feedback and research, the IASB concluded that the IFRS 9 impairment framework is generally functioning as intended and provides valuable information to users of financial statements. Key findings include:

  1. Timelier Loss Recognition: The requirements have successfully led to the more timely recognition of credit losses.
  2. Useful Investor Information: The expected credit loss (ECL) information is useful to investors. However, the PIR indicated a need for targeted improvements to credit risk disclosure clarity and effectiveness.
  3. General Consistency: Application is generally consistent, though specific areas require further clarification and guidance to ensure uniform interpretation.

Addressing Feedback & Next Steps:

In response to the PIR findings, the IASB will take action through two projects:

  1. Amortised Cost Measurement Project: The Board will prioritize clarifications regarding the requirements for:
    • Modification of financial instruments
    • Derecognition of financial instruments
    • Write-off practices
    • The impact of these actions on ECL recognition.
  2. New Disclosure Project: The IASB has initiated a separate project focused specifically on developing targeted enhancements to the credit risk disclosure requirements within IFRS 7 / SFRS(I) 7 Financial Instruments: Disclosures.

The PIR validates the core effectiveness of the IFRS 9 impairment model. While confirming its benefits for timeliness and investor information, the IASB is moving forward with specific initiatives to refine application guidance (particularly around modifications, derecognition, and write-offs) and to improve the utility of credit risk disclosures under IFRS 7.

Source: IFRS Foundation, 4 July 2024.