The financial sector is undergoing changes. New standards and regulations call for changes in the status quo for financial institutions. Your financial institution not spared. Local and global finance partners are increasing in demand for transparency in financial reporting. The time is now for you to position yourself as a role model transformative financial institution by adopting the International Financial Reporting Standards (IFRSs) specifically IFRS 9 for the computation of impairment provision based on historical and futuristic events. Failure to comply with the best global financial reporting standards risks your financial institution to losing out on fund mobilization to give out as loans. As a CEO or Managing Director, you must demonstrate good governance by complying with both local regulatory reporting requirements as well as best international practices and in accordance with International Financial Reporting Standards.
Over the years, financial institutions have had complications with credit loss and as such, they had done too little, too late, to recognize losses on wobbly assets under International Accounting Standard Thirty-Nine (IAS 39). IFRS9 becomes ideal with its anticipation of the expected loss for the 12 months and life time of the financial assets. In July 2014, the International Accounting Standards Board (IASB) released a final version of the IFRS 9 standard, aimed at replacing most of the previous guidance detailed in IAS 39. The new accounting Standard for financial instruments: – classification and measurement was effective 1st January 2018. Under IAS 39, loan loss provisions were made only when losses had actually been incurred, even if financial institutions would see trouble coming. However, IFRS 9 obliges your bank to provide for expected credit losses instead. This is a game changing standard that takes prudence to the next level.
Timely alignment of IFRS 9 by your bank with the regulatory Bank supervision and impairment allowances will improve stakeholder transparency, reporting and enhance financial stability. However, the benefits of the standard will potentially depend on its proper and consistent use.
Summit Consulting Ltd has developed an IFRS 9 model for easy compliance to IFRS 9. Email us on [email protected] or call Godfrey Ssenyonjo, our champion on +256775845691 to schedule an appointment