IFRS 9 «FINANCIAL INSTRUMENTS» IN THE CONTEXT OF SECURITY ECONOMIC SECURITY OF CREDIT INSTITUTIONS

2021 ◽  
Author(s):  
Алена Михайловна Кабанова ◽  
Людмила Ивановна Кругляк
Keyword(s):  
Financial Reporting ◽  
Economic Security ◽  
Financial Instruments ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
New Knowledge ◽  
Ifrs 9 ◽  
Credit Institutions

В статье рассматриваются актуальные особенности Между-народного стандарта финансовой отчетности (IFRS) 9 при их внедрении в российской банковской отчетности. Применение МФСО требует новых знаний, принципов и навыков специалистов соответствующих служб. МСФО - это не свод строгих, конкретных правил, а определенный набор требований и принципов. The article discusses the current features of the International Financial Reporting Standard (IFRS) 9 in the implementation and transformation of Russian banking reporting. The application of IFRS requires new knowledge, principles and skills of specialists of the relevant services. IFRS is not a set of strict, specific rules, but a specific set of requirements and principles.

scholarly journals Approaches to Building Default Probability Models for Financial Instruments of Project Financing at Long Time Horizons

2021 ◽  
Vol 15 (4) ◽  
pp. 66-87
Author(s):  
Alfia Vasilieva
Keyword(s):  
Credit Risk ◽  
Financial Reporting ◽  
Commercial Banks ◽  
Financial Instruments ◽  
Project Financing ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Time Horizons ◽  
Ifrs 9

  Project financing is one of the priority tools for stimulating the country's economic growth around the world, which allows the implementation of large-scale and capital-intensive projects, providing favorable credit conditions with insufficient creditworthiness of the project beneficiaries [1]. As a rule, project financing instruments are long-term (10-30 years, depending on the type of transaction), so this asset class is interesting for the implementation of the task of building long-term models for assessing credit risk associated with the introduction in 2018 of the new international financial reporting standard IFRS 9 "Financial Instruments". The new standard requires financial institutions to calculate their expected credit loss (ECL) at the time of granting loans and other banking products exposed to credit risk [2], taking into account different time horizons, which significantly changes the traditional approaches to assessing credit risk by commercial banks [3], [4]. As part of this work, a model was built to assess the long-term probability of default for the portfolio of assets of a Russian commercial bank belonging to the project finance segment in accordance with the requirements of the International Financial Reporting standard IFRS 9 "Financial Instruments". At present, the topic of this work is extremely relevant and may be of interest both for commercial banks that are faced with the problem of improving credit risk assessment models  

scholarly journals Adapting the Default Weighted Survival Analysis Modelling Approach to Model IFRS 9 LGD

Risks ◽  
2021 ◽  
Vol 9 (6) ◽  
pp. 103
Author(s):  
Morne Joubert ◽  
Tanja Verster ◽  
Helgard Raubenheimer ◽  
Willem D. Schutte
Keyword(s):  
Survival Analysis ◽  
Financial Reporting ◽  
Proportional Hazards ◽  
Proportional Hazards Model ◽  
Survival Curve ◽  
Cox Proportional Hazards ◽  
Cox Proportional Hazards Model ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Ifrs 9

Survival analysis is one of the techniques that could be used to predict loss given default (LGD) for regulatory capital (Basel) purposes. When using survival analysis to model LGD, a proposed methodology is the default weighted survival analysis (DWSA) method. This paper is aimed at adapting the DWSA method (used to model Basel LGD) to estimate the LGD for International Financial Reporting Standard (IFRS) 9 impairment requirements. The DWSA methodology allows for over recoveries, default weighting and negative cashflows. For IFRS 9, this methodology should be adapted, as the estimated LGD is a function of in the expected credit losses (ECL). Our proposed IFRS 9 LGD methodology makes use of survival analysis to estimate the LGD. The Cox proportional hazards model allows for a baseline survival curve to be adjusted to produce survival curves for different segments of the portfolio. The forward-looking LGD values are adjusted for different macro-economic scenarios and the ECL is calculated for each scenario. These ECL values are probability weighted to produce a final ECL estimate. We illustrate our proposed IFRS 9 LGD methodology and ECL estimation on a dataset from a retail portfolio of a South African bank.

scholarly journals Internal model for IFRS 9 - Expected credit losses calculation

2018 ◽  
Vol 69 (3) ◽  
pp. 269-297 ◽  
Author(s):  
Hrvoje Volarević ◽  
Mario Varović
Keyword(s):  
Financial Reporting ◽  
Internal Model ◽  
Balance Sheet ◽  
Analytic Hierarchy ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
External Data ◽  
Simple Implementation ◽  
Ifrs 9 ◽  
Credit Losses

This article explores and analyzes the implementation problem of International Financial Reporting Standard 9 (IFRS 9) which is in use from 1 January 2018. IFRS 9 is most relevant for financial institutions, but also for all business subjects with a significant share of financial assets in their Balance sheet. The main objective of this article is the implementation of new impairment model for financial instruments, which is measurable through Expected Credit Losses (ECL). The use of this model is in correlation with a credit risk of the company for which it is necessary to determine basic variables of the model: Exposure at Default (EAD), Loss Given Default (LGD) and Probability of Default (PD). Basel legislation could be used for LGD calculation while PD calculation is based on specific methodology with two different solutions. In the first option, PD is taken as an external data from reliable rating agencies. When there is no external rating, an internal model for PD calculation has to be created. In order to develop an internal model, authors of this article propose application of multi-criteria decision-making model based on Analytic Hierarchy Process (AHP) method. Input data in the model are based on information from financial statements while MS Excel is used for calculation of such multi-criteria problem. Results of internal model are mathematically related with PD values for each analyzed company. Simple implementation of this internal model is an advantage compared to other much more complicated models.

scholarly journals An Analysis of Differences in Terms of Professional Interests Based on the Project to Replace IAS 39

2015 ◽  
Vol 26 (68) ◽  
pp. 181-194
Author(s):  
Cláudia Daniela Ferreira da Mota Carvalho ◽  
Fábio Henrique Ferreira de Albuquerque ◽  
Joaquín Texeira Quirós ◽  
Maria do Rosário Fernandes Justino
Keyword(s):  
Financial Reporting ◽  
Professional Associations ◽  
International Accounting ◽  
Financial Instruments ◽  
Chi Square ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Harmonization Process ◽  
Chi Square Test ◽  
Ias 39

<p>The professional interests of the various stakeholders groups are often seen as obstacles to full accounting harmonization. Studying different professional interests in the accounting domain is significant for organizations involved in the international accounting harmonization process, insofar as it enables them to identify the main obstacles to face in order to achieve full harmonization. Thus, this article is aimed at analyzing the differences in terms of professional interests by addressing the participation of various stakeholders groups in the process of issuing/modifying standards of the International Accounting Standards Board (IASB). Based on content analysis, we examined the comment letters sent to the IASB in the context of the first part of the first phase of the project to replace the International Accounting Standard (IAS) 39, entitled "Financial Instruments - Recognition and Measurement", by the International Financial Reporting Standard (IFRS) 9, on its turn entitled "Financial Instruments". Respondents were identified according to the stakeholders group, and, later, the collected data underwent a nonparametric chi-square test. The results of this study indicate there are significant differences between the answers obtained from the various stakeholders groups involved in the process of issuing or reviewing a standard of the IASB, above all made clear between the group of financial preparers and the regulatory and/or standard-setting agencies and the professional associations related to accounting.</p>

scholarly journals Analytical study of the implications of the adoption of IFRS 9 on the credit and financing policies of Arab banks: دراسة تحليلية للآثار المترتبة على تبني IFRS 9 على السياسات الائتمانية والتمويلية للمصارف العربية

2017 ◽  
Vol 1 (9) ◽  
Author(s):  
Salah Ali Ahmed Mohammed - Mahjoub Abdullah Hamid
Keyword(s):  
Financial Reporting ◽  
Banking System ◽  
Special Focus ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Accounting Systems ◽  
Financing Policies ◽  
Standard Application ◽  
Ifrs 9 ◽  
Application Requirements

The objective of this study was to analyze the anticipated effects of the application of the International Financial Reporting Standard (IFRS9), which replaced the International Standard ( IAS 39), on the Arab banks. The obligatory application of the new standard will take place on the beginning of 2018. The application requirements of this standard constitute a great challenge to the Arab banks, in the fields of credits, finance and the banking and accounting systems. The study represented the International Financial Reporting Standard (IFRS 9) and the requirements of classification and measurement of the obligations, with special focus on the differences between the two standards. The study as well, focused on the challenges which face the standard application and the effect of this application on the banking system, with special focus on the expected credits loss (ECL). The study represented examples of some Arab banks experiences and evaluated these experiences. The study has come out with some results, including that the change of the (ECL) model will create some impediments on the credit and finance policies of the Arab banks, whereas the standard (IFRS9) will strengthen the shareholders and depositors trust, because it adopts a perceptional policy which avoids the expected loss which, in turn, reduces the liquidity risk and the failure of the obligations payment. The study also proposed some recommendations.

scholarly journals Methods of Calculation of Expected Credit Losses Under Requirements of IFRS 9

2019 ◽  
Vol 13 (4) ◽  
pp. 74-86
Author(s):  
Alfiya Vasilyeva ◽  
Elvina Frolova
Keyword(s):  
Credit Risk ◽  
Financial Reporting ◽  
Time Lag ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Macroeconomic Factors ◽  
Credit Risks ◽  
Ifrs 9 ◽  
The Impact ◽  
Credit Losses

The most important area of work for financial market regulators including International Accounting Standards Board is to clarify the metrics of credit assessment. This problem became particularly relevant after the financial crisis of 2008, when the insolvency of approaches to the assessment of credit risks adopted under the then international financial reporting standard IFRS (IAS) 39 became apparent, since credit losses on financial instruments were taken into account by the “loss model”, and therefore, the asset was recognized as financially impaired due to the fact of credit quality deterioration and significant time lag. From 1 January 2018 of a new international financial reporting standard IFRS9 IFRS 9 is based on a different approach — the principle of “expected credit losses” (ECL). The transition to IFRS 9 is intended to strengthen the banking system by increasing reserves , the banking system’s stability can be increased also. The new business model radically changes the approach to the formation of reserves, including by taking into account the impact of macroeconomic indicators on their value. According to various estimates, the scale of increase in reserves ranges from 30% to 50%. The purpose of this article is to systematize the methodological principles and approaches that underlie the requirements of IFRS 9 (basic and simplified and POCI approaches), as well as a comparison of the main methods for assessing the probability of default and expected credit losses (Weibul distribution, migration matrix, generator matrix ) In the framework of this article, the authors formulated criteria for the transfer of assets between the stages of credit risk (stage), and also formulated the principles for calculating expected credit risks for each stage, taking into account macroeconomic factors. This article is of practical value, as it can be the basis for the development of methods for calculating the expected credit risks of corporate clients of commercial banks, and can also be used to improve credit risk management models.

scholarly journals Does the use of hedge derivatives improve the credit ratings of Brazilian companies?

2020 ◽  
Vol 31 (82) ◽  
pp. 50-66
Author(s):  
Rafael Moreira Antônio ◽  
Marcelo Augusto Ambrozini ◽  
Vinícius Medeiros Magnani ◽  
Alex A. T. Rathke
Keyword(s):  
Financial Reporting ◽  
Panel Data Analysis ◽  
Credit Ratings ◽  
Assessment Process ◽  
Financial Instruments ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Publicly Traded Companies ◽  
Rating Agencies ◽  
The Impact

ABSTRACT The purpose of this study is to identify the factors that may explain the attribution of credit ratings to firms, focusing especially on the impact of derivatives. The gap explored by this research lies in the novelty of analyzing how rating agencies perceive the effects caused by information related to derivatives use by Brazilian publicly-traded companies. In addition, this study shifts the previous findings from stock analysts to rating agencies, reinforcing the discussion about the complexity of derivatives in the credit risk assessment process. This research topic is currently of interest due to the adoption of International Financial Reporting Standard (IFRS) 9 (Accounting Pronouncements Committee - CPC - 48), which came into effect in January of 2018. Based on these rules, the main novelty presented in this article was its verification of the effect of the derivatives used by companies in order to hedge their credit ratings, thus helping to fill the empirical gap that exists in the literature from the area. The results found challenge the theory that the use of hedge derivatives is viewed positively by investors. However, although no significant statistical impact was found on the ratings of companies that use derivatives, it was observed that the companies that use derivatives and have the highest notional values were those that received the best ratings from Moody’s. With this we broadened the debate about the complexity of the information linked to derivatives use. In the study, 2,090 ratings attributed to non-financial companies with stocks traded on the Brasil, Bolsa, Balcão [B]³ exchange were examined between 2010 and 2016 by using panel data analysis, which lends robustness to the analysis and findings. Contrary to the central hypothesis of this research, the results presented here show that, in Brazil, companies that use derivative financial instruments for hedging do not receive the best credit ratings from rating agencies. One of the main contributions of this study is the evidence that Standard & Poor’s and Moody’s were unable to consistently incorporate information related to derivatives use, thus broadening the discussion about the complexity of these financial instruments.

scholarly journals Catch the Heterogeneity: The New Bank-Tailored Integrated Rating

2021 ◽  
Vol 14 (7) ◽  
pp. 312
Author(s):  
Daniela Arzu ◽  
Marcella Lucchetta ◽  
Guido Max Mantovani
Keyword(s):  
Financial Markets ◽  
Financial Institutions ◽  
Financial Reporting ◽  
Theoretical Framework ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Tail Risk ◽  
Systemic Risks ◽  
Ifrs 9 ◽  
Future Direction

The purpose of this article is to develop a bank-oriented rating approach, tailored by incorporating the various heterogeneity dimensions characterizing financial institutions, named “Bank-Tailored Integrated Rating” (BTIR). BTIR is able to catch the financial cycle, including the pandemic crisis, and the ongoing change in banking normative from a microeconomic perspective, and it is inherently coherent with the challenging frontier of forecasting tail risk in financial markets in similar ways as in De Nicolò and Lucchetta (2017), although their approach is macroeconomic) since it considers the downside risk in the theoretical framework. The method employed was an innovative integrated rating (IR) statistical and econometrical panel pre-selection analysis that takes into account the characteristics of risk and the greater heterogeneity of the banks. The result is a challenge rating procedure delivering forward-looking preselection requested by the new International Financial Reporting Standard (IFRS-9). The future direction is extremely promising given the increase in idiosyncratic and systemic risks in financial markets.

Business Model Literature Overview

2014 ◽  
pp. 79-130 ◽  
Author(s):  
Ales Novak
Keyword(s):  
Business Model ◽  
Financial Reporting ◽  
Business Models ◽  
Potential Role ◽  
Financial Instruments ◽  
Business Logic ◽  
Literature Overview ◽  
Ifrs 9 ◽  
Definition Of

The term ?business model' has recently attracted increased attention in the context of financial reporting and was formally introduced into the IFRS literature when IFRS 9 Financial Instruments was published in November 2009. However, IFRS 9 did not fully define the term ‘business model'. Furthermore, the literature on business models is quite diverse. It has been conducted in largely isolated fashion; therefore, no generally accepted definition of ?business model' has emerged. Therefore, a better understanding of the notion itself should be developed before further investigating its potential role within financial reporting. The aim of this paper is to highlight some of the perceived key themes and to identify other bases for grouping/organizing the literature based on business models. The contributions this paper makes to the literature are twofold: first, it complements previous review papers on business models; second, it contains a clear position on the distinction between the notions of the business model and strategy, which many authors identify as a key element in better explaining and communicating the notion of the business model. In this author's opinion, the term ‘strategy' is a dynamic and forward-looking notion, a sort of directional roadmap for future courses of action, whereas, ‘business model' is a more static notion, reflecting the conceptualisation of the company's underlying core business logic. The conclusion contains the author's thoughts on the role of the business model in financial reporting.

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