IFRS 9/CECL Special Report 2017
Implementation of International Financial Reporting Standard 9 (IFRS 9) on January 1, 2018 will mark a sea change in centuries-old accounting conventions, and will force banks to dramatically increase provisioning against loans that are at risk of turning sour.
The regime and its US analogue, the Current Expected Credit Loss rule, usher in a shift to expected credit loss (ECL) accounting in favour of the current incurred losses approach – in which a loan is recorded as healthy on a bank’s books up until the point of impairment. Under IFRS 9, dealers will be required to calculate ECL for all loans over a 12-month period, and over the entire lifetimes of loans that have deteriorated in credit quality.
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