Financial Instruments – Impairment

BACKGROUND

The Accounting Standards Board (AcSB) is participating in the second phase of the International Accounting Standards Board’s (IASB) multi-phased project, IFRS 9: Financial Instruments (replacement of IAS 39), to improve the usefulness of financial statements for users by simplifying the classification and measurement requirements for financial instruments.

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The objective of the second phase is to improve amortised cost measurement of financial assets, in particular the transparency of provisions for losses on loans and for the credit quality of financial assets.

The AcSB participates in the consultations and activities on this project to ensure that Canadian entities’ financial reporting needs are considered by the IASB.  The AcSB plans to incorporate this new guidance into Part I of the Handbook when final in accordance with its strategy of adopting International Financial Reporting Standards (IFRSs)for publicly accountable enterprises.

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PROJECT NEWS

Final Standard – Financial Instruments
February 5, 2015. Final IFRS 9 Financial Instruments has been incorporated into Part I of the CPA Canada Handbook – Accounting. The standard is effective for annual periods beginning on or after January 1, 2018 with earlier application permitted.

AcSB Response – OSFI Draft Advisory: Early Adoption of IFRS 9 Financial Instruments for Federally Regulated Entities with October Year-ends
November 14, 2014. The AcSB has responded to the Office of Superintendent of Financial Institutions’ Draft Advisory. The letter expresses concerns about OSFI’s proposal and notes that the AcSB concerns itself with the quality of Canadian entities’ implementation of new IFRSs given the interpretation risk and the associated implementation costs. 

AcSB Decision Summary – November 5-6, 2014 
The AcSB discussed the Office of the Superintendent of Financial Institutions of Canada’s draft advisory regarding early adoption of IFRS 9 for federally regulated entities with October year ends. The AcSB decided to submit a comment letter on this topic. The letter notes that the AcSB concerns itself with the quality of Canadian entities’ implementation of new IFRSs, in particular standards as complex as IFRS 9, given the interpretation risk and the associated implementation costs.

Canadian Member Appointed – IFRS Transition Resource Group for Impairment of Financial Instruments
August 28, 2014. Helen Killoch, Vice-President and Chief Accountant of the Bank of Montreal, has been appointed as a member.  This new IASB Group will support stakeholders on implementation issues that may arise as a result of the new impairment requirements. Any stakeholder can submit a potential issue for discussion at the Group meetings.

Final Standard – Financial Instruments
July 28, 2014. The IASB has issued a complete and revised IFRS 9.The improvements introduced by IFRS 9 include a logical model for classification and measurement, a single, forward-looking expected loss impairment model and a reformed approach to hedge accounting. IFRS 9 is effective for annual periods beginning on or after January 1, 2018 with earlier application permitted.

Call for Applications – IFRS Transition Resource Group for Impairment of Financial Instruments
June 27, 2014. The IASB is seeking applications for membership of this Group. Candidates should be financial statement preparers, auditors or representatives of related groups with expertise or practical knowledge of the expected credit loss model for impairment of financial assets. Financial instruments knowledge under IFRSs is also required. Applications should be submitted by July 14, 2014.

AcSB Response – Financial Instruments: Expected Credit Losses
On July 5, 2013, the AcSB submitted a comment letter responding to the IASB's Exposure Draft issued in March 2013. The letter supports the proposed standard but encourages convergence with the FASB. It expresses concern that the standard focusses very heavily on the financial services industry and notes that many entities and, in particular, smaller financial institutions and non-financial entities, will need to incur significant costs to implement the requirements. The letter also notes concerns with the lack of a conceptual basis for recognizing day one credit losses and with basing credit allowances on relative changes in credit risk as opposed to absolute changes. The letter requests the mandatory effective date of IFRS 9 be postponed to allow at least three complete years after the final standard is published. Read the AcSB letter posted by the IASB.

AcSB Exposure Draft – Financial Instruments: Expected Credit Losses
May 17, 2013.  The AcSB has issued an Exposure Draft that corresponds to the IASB’s Exposure Draft on this topic. Canadian stakeholders are encouraged to submit their comments, on the form provided, by July 5, 2013.

IASB Exposure Draft – Financial Instruments: Expected Credit Losses
March 11, 2013.  The IASB has issued an Exposure Draft proposing amendments to IFRS 9 Financial Instruments with regard to impairment of financial assets.  Canadian stakeholders are encouraged to submit their comments to the IASB by July 5, 2013.

AcSB Response – Financial Instruments:  Impairment
On April 1, 2011, the AcSB submitted a comment letter responding to the IASB’s Supplementary Document to its 2009 Exposure Draft, “Financial Instruments: Amortised Cost and Impairment.” The letter acknowledges that the proposals address some of the concerns with the model proposed in the 2009 Exposure Draft. However, the letter expresses concern that the proposals are more complex than necessary to achieve the objectives of the project and will not provide better information for users. The letter recommends that the Boards adopt the FASB’s approach to recognizing and measuring impairment in financial assets measured at amortized cost. The AcSB letter posted by the FASB is available here.

AcSB Decision Summary – March 22-23, 2011
The AcSB discussed the key issues to be included in its response letter on “Financial Instruments: Impairment,” an IASB supplement to its 2009 Exposure Draft, “Financial Instruments: Amortised Cost and Impairment.”

Exposure Draft – Financial Instruments: Impairment
March 8, 2011. The AcSB has issued an Exposure Draft that corresponds to the IASB’s ED on this topic. Comments, on the form provided, are requested by April 1, 2011.

AcSB Decision Summary – February 16, 2011
The AcSB approved the issuance of an exposure draft reflecting the proposals in the IASB Exposure Draft, "Financial Instruments: Impairment" (supplement to the 2009 Exposure Draft, "Financial Instruments: Amortised Cost and Impairment").

Supplementary Document – Financial Instruments: Impairment
February 4, 2011. The IASB has issued a Supplementary Document to its 2009 Exposure Draft, “Financial Instruments: Amortised Cost and Impairment,” proposing a more forward-looking approach to accounting for credit losses. The proposals are the result of the IASB and FASB working to align their approaches. The comment deadline is April 1, 2011.  

AcSB Response – Financial Instruments:  Amortised Cost and Impairment
On June 29, 2010, the AcSB submitted a comment letter responding to the IASB’s Exposure Draft. The letter does not support the IASB’s proposal to require that an entity’s expectations about future credit losses on a financial asset measured at amortized cost should be incorporated into the asset’s effective interest rate with subsequent changes in expectations recognized in profit and loss immediately. The AcSB thinks that the proposal does not meet the IASB’s and the FASB’s objective of developing a single global standard for financial instruments that reduces the complexity in current standards and produces financial statements that are more easily understood. The AcSB letter posted by the IASB is available here.

AcSB Decision Summary – June 16, 2010
The AcSB approved a comment letter to the IASB on its Exposure Draft, “Financial Instruments: Amortised Cost and Impairment”. The AcSB recommends that the IASB not proceed with the proposal and that the IASB and the FASB work to develop a single, globally converged standard that is less complex for preparers and more easily understood by financial statement readers.

AcSB Decision Summary – May 5, 2010
The AcSB discussed the development of its response to the IASB Exposure Draft, “Financial Instruments: Amortised Cost and Impairment.” The AcSB decided that, rather than focusing on the details of the proposals, it should highlight its main concern that the IASB and the FASB are not fulfilling their objective of developing a single global standard for financial instruments that reduces the complexity in current standards and produces financial statements that are more easily understood.

Financial Instruments – Amortised Cost and Impairment
May 4, 2010. The IASB has issued a questionnaire for financial statement users seeking input on the captioned topic. Responses to the survey are due by June 30, 2010.

Roundtable – Financial Instruments: Amortized Cost and Impairment
March 31, 2010. Attend a roundtable discussion on Friday, April 30, 2010 to share your views on the IASB's proposed new standard.

Exposure Draft – Financial Instruments: Amortized Cost and Impairment
January 4, 2010. The AcSB has issued an Exposure Draft (ED) that corresponds to the IASB’s ED on this topic. Comments are requested by June 15, 2010.

AcSB Decision Summary – December 10, 2009
The AcSB decided to issue an exposure draft seeking comment on Canadian implications of adopting the proposals in the IASB Exposure Draft, “Financial Instruments: Amortised Cost and Impairment.” The AcSB staff plan to conduct public roundtables in 2010 to discuss the possible effect on Canadian businesses of implementing the proposals. Comments on the Canadian exposure draft will be due by June 15, 2010. Comments to the IASB are due by June 30, 2010.

Exposure Draft – Financial Instruments:  Amortised Cost and Impairment
November 10, 2009. The IASB has issued an Exposure Draft on the amortized cost measurement and impairment of financial instruments. The comment deadline is June 30, 2010.

AcSB Decision Summary – July 16, 2009
The AcSB noted the recent issue by the IASB of a Request for Information, “Financial Instruments: Impairment of Financial Assets,” on the feasibility of an expected loss model for recognizing impairment of financial assets. The AcSB decided that its staff should bring the Discussion Paper to the attention of financial institutions, finance companies and other entities most likely to be significantly affected. The IASB comment deadline is September 1, 2009.

Request for Information – Impairment of Financial Assets
June 26, 2009. The IASB has issued a Request for Information on the feasibility of an expected loss model for the impairment of financial assets. The comment deadline is September 1, 2009.

 

Disclaimer: This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal ballot process.