IFRS 9 Financial Instruments
IFRS 9 was issued in 2014 and came into force on 1 January 2018.
- Many companies will need to provide more information than they currently do to fully apply the provisions of the new standard.
- Implementation may also require significant resources and improvements to existing IT systems.
- Important decisions regarding the key provisions of IFRS 9 have to be made early in the adoption process.
- Application of the standard will have an impact on many business functions, including accounts, finance, analytics and the C-suite.
- Do you have a detailed IFRS 9 implementation roadmap?
- Have you identified all the financial instruments that fall within the scope of IFRS 9? Do you have the required contractual conditions for these instruments for all Group entities that will adopt IFRS 9?
- Have you established an IFRS 9 business model analysis procedure for each of your financial asset portfolios?
- Have you identified all your financial assets that are subject to IFRS 9 impairment requirements?
- Have you identified the assets eligible for the simplified IFRS 9 approach, the assets requiring the general IFRS 9 approach, and the assets for which you can choose the accounting treatment?
- Have you determined which models you will use and what information you require for particular instruments in accordance with the accounting treatment you chose for them?
- Have you determined how you will collect the historical default rates to be used as the basis for calculating the allowance? Do you have sufficient data to analyse the full credit cycle of your current asset portfolio? How will you adjust historical data to reflect the nature of your current asset portfolio? Have you determined the forecasting information you will use to calculate the allowance and the source of this information?
- Have you determined how you will ensure compliance with IFRS 9 impairment requirements for assets not eligible for the simplified approach?
- Have you analyzed the new disclosure requirements and determined which of them apply to your organization, including transition disclosure requirements?
- Have you developed a detailed template for all financial statement disclosures under IFRS 9?
- Do you have all the data and information you need to prepare disclosures of comparative information?
- Have you identified all the systems that will be affected by the adoption of IFRS 9?
- Have you determined all the internal and external data sources required for the adoption of IFRS 9?
Deloitte can support you in the following areas:
- Analysis of financial instruments and development of a classification methodology
- Review of the classification methodology developed by the client
- Provision of customizable templates tailored to the client’s needs
- Advisory support
- Methodological support
o Transition readiness assessment
o Adequacy and quality assessment of available information
o Development of the ‘to-be’ model and IFRS 9 implementation map
o Analysis and assessment of the impact of IFRS 9 on financial statements
o Assistance selecting the best transition approach
o Preparation of accounting policies and support developing key judgments
o Calculation of journal entry adjustments, including retrospective adjustments
o Preparation of draft disclosures
o ‘As-is’ business process analysis, including lease management-related risks and controls
o Reconfiguration of accounting systems
Expected credit loss models for IFRS 9
- Impairment on a collective basis (loan portfolios)
- Impairment on an individual basis (individually significant loans)
- Impairment of investments in securities
- Impairment of bank-to-bank deposits/loans
- Impairment of accounts receivable
- Development and implementation of impairment models for loan portfolios, financial instruments and accounts receivable on a collective and individual basis;
- Review of the impairment methodology developed by the client for compliance with IFRS 9 (gap analysis);
- Provision of customizable templates tailored to the client’s needs
- Methodological support:
o Analysis of assumptions and possible approaches for determining the loan portfolio impairment stages based on changes in credit risk upon initial recognition;
o Assessment of the probability of default;
o Loss given default modeling;
o Exposure at default modeling;
o Calculation of expected credit losses;
o Assessment of the impact of macroeconomic indicators at all impairment stages of loan portfolios/individually significant loans/financial instruments. Advisory support:
o Transition readiness assessment;
o Adequacy and quality assessment of available information.
o Development of the ‘to-be’ model and IFRS 9 implementation map;
o Analysis and assessment of the impact of IFRS 9 on financial statements;
o Assistance selecting the best transition approach;
o Preparation of the accounting policies and support developing key judgments;
o Calculation of journal entry adjustments, including retrospective adjustments;
o Preparation of draft disclosures;
o ‘As-is’ business process analysis, including lease management-related risks and controls;
o Reconfiguration of accounting systems.
Deloitte professionals have developed models that give users the basic tools they need to forecast credit loss given default, which will help them create IFRS 9 compliant allowances for collective and individual impairment.
We welcome any opportunity to share our knowledge, expertise and proprietary tools, all based on best global practices.
Our models enable assessments of expected credit losses to help users create an impairment allowance for all types of financial instruments.
Our solutions cover:
- Collective impairment:
- Individual impairment:
o Loan portfolios;
o Accounts receivable;
o Individually significant loans;
o Investments in securities;
o Bank-to-bank deposits and loans;
o Accounts receivable
Comprehensive solutions: fineVARE
Finevare is a comprehensive, industry-specific software solution that helps banks transition to IFRS 9.
The solution incorporates the best practices in IFRS 9 compliance, backed up by the expertise and experience of the Deloitte EMEA team.
Finevare addresses all aspects of IFRS 9 transition, from delivering an instantaneous impact assessment to providing a reliable software platform that can be easily integrated into a bank's IT operating infrastructure over the long term.
An integrated, modular approach to data management, provisioning, reporting, accounting, and further use to obtain service-oriented benefits based on statistical analysis and reporting of historical data.
Flexible software that is compatible with both in-house and third-party banking settlement models.
This platform is designed, implemented and maintained by Deloitte, based on more than 10 years of international experience in software development and post-deployment customer support.
The platform used by a number of financial institutions across various regions (25 banks in Europe, the Middle East and Africa).