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The International Accounting Standards Board has issued the fourth and final version of its new standard on financial instruments accounting – IFRS 9 Financial Instruments.
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IASB issues new standard
28 July 2014
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8 minute read
However, while internationally, the new standard is likely to have a significant impact on how banks account for credit losses on their loan portfolios, its impact in Australia is likely to be less severe, according to KPMG.
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Paul Lichtenstein, KPMG Financial Risk Management partner, said this is because the impact of the new standard will depend on the starting point for banks and how provisions are currently calculated.
“In Australia, banks have traditionally been conservative in provisioning approaches and levels. In addition, the strong state of the economy, the banks’ emergence from the depths of the GFC relatively unscathed and APRA’s regulatory scrutiny of provisioning levels have contributed to the current sound position of Australian banks in this area,” he said.
“As a result, the impact in Australia is likely to be less pronounced than in many other countries, certainly on issues like banks’ regulatory capital ratios.
"Nevertheless, Australian banks must not ignore the new standard and there will certainly be changes to provisioning methodologies, systems and models. Banks will also have to carefully consider how these changes are communicated to the market given the sensitivity of investors to provisioning levels."
According to KPMG, there will also implications for non-financial sector companies.
Patricia Stebbens, KPMG Audit partner, said, "Other sectors should not automatically assume that the impact of the classification and measurement and impairment requirements of the new standard will be small, as it depends on the exposures they have and how they manage them."
“We expect that planning for IFRS 9 adoption – including implementation of the new hedge accounting requirements published in 2013 – will be an important issue for corporate treasurers and accountants generally," Ms Stebbens said.
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