EUROPEAN UNION: ESMA Issues Public Statement on Implementation of IFRS 9

Friday November 11 2016

On 10th November 2016, the European Securities and Markets Authority (ESMA) published a Public Statement on Issues for consideration in implementing IFRS 9: Financial Instruments (the Statement) which highlights both the need for consistent, high-quality implementation of IFRS 9 and the need for transparency on its impact to users of financial statements.

IFRS 9 replaces major parts of International Accounting Standard (IAS) 39 Financial Instruments: Recognition and Measurement and contains a new impairment model based on expected credit losses (ECL). It also includes new requirements and guidance on the classification and measurement of financial assets and introduces new requirements to address the so-called ‘own credit’ risk issue.

The new standard is expected to have significant impacts on financial institutions and potentially non-financial entities which can benefit from the changes made to the hedge accounting requirements. Consequently, ESMA is of the view that all type of issuers need to carefully assess the impact of IFRS 9 in their particular circumstances when implementing it.

The IFRS 9 effective date of application in the EU should be 1 January 2018. However, ESMA expects their Statement to be taken into account and reflected in the 2016 and 2017 annual financial statements and 2017 interim financial statements by firms, thereby enhancing the transparency and comparability of IFRS financial statements in the EU.

In parallel, the European Banking Authority (EBA) has also published a Report on results from the EBA impact assessment of IFRS 9, following its January 2016 impact assessment of the standard on a sample of approximately 50 institutions across the European Area (EEA).

Click on the link above for further details.