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IFRS 9 to redefine risk recognition and absorption by banks 

May 23, 2016

Babu Das Augustine, Gulf News Banking

Ahead of the introduction of International Financial Reporting Standards 9 (IFRS 9), a game-changer for banks across the world, UAE lenders need to prepare themselves to change the processes of reporting credit impairments, according industry experts.

The new regulation strongly affects the way credit losses are recognised in the balance sheet and profit and loss (P&L) statement. While impairments are currently based on “incurred losses”, IFRS 9 introduces an approach based on future expectations, namely expected losses (EL).

The main impact on banks is the need to recognise expected losses for all financial products, and at individual and grouped-asset levels. Banks will have to update their calculation at each reporting date to reflect changes in the credit quality of their assets. This will significantly increase the number and frequency of impairment quantifications that must be undertaken and the amount of data that must be processed for such purpose.

“IFRS 9 is a change that will significantly impact banks across the globe, as well as here in the UAE. In fact, the biggest accounting development for banks today is likely to be IFRS 9, as it will significantly impact balance sheets, accounting systems and processes,” said Yousuf Hassan, Partner, Risk Consulting at KPMG. Read more

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