Session1_pfrs9_javier.pdf
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Philippine Financial Reporting Standards 9 Financial Instruments
From IAS 39 to IFRS 9 IAS 39 • • •
Memo to BSFIs Circular No. 494 Provisioning Circular No. 512 FRP
IFRS 9 Circular Nos. • 708 • 733 • 761
2005 2011/12
Circular No. • 912
2016
FULL ADOPTION
2018
IFRS 9 The final version of the Standard was issued in July 2014. Full implementation by January 1 2018.
Classification and Measurement
Impairment
Hedging
Classification and Measurement IAS 39
IFRS 9* FVTPL
Held for trading
Classification and Measurement
Available-forsale Held-to-maturity
FVOCI HTC (Amortized Cost)
*Fair value through profit or loss (FVTPL), Fair value through other comprehensive income (FVOCI)
Classification and Measurement
IBODI
HTM
AFS
HTC
FVOCI
IFRS 9 The final version of the Standard was issued in July 2014. Full implementation by January 1 2018.
Classification and Measurement
Impairment
Hedging
Impairment - Background IAS 39 Objective evidence that a loss had been incurred before measuring the loss
Impaired (e.g. NPL)
Unimpaired
Too little, Too late
Impairment - Expected Credit Losses (ECL) • Based on an expected credit losses model • Future-focused and more timely loss recognition
• Principles-based accounting standard geared towards the earlier recognition of impairment losses
Impairment – The Three (3) Stages Bucket 1
Bucket 2
(no significant increase in credit risk)
(with significant increase in credit risk) To compute ECL
Bucket 3
(impaired)
Example
Principle 18 The supervisor determines that banks have adequate policies and processes for the early identification and management of problem assets, and the maintenance of adequate provisions and reserves.
Basel Core Principles for Effective Banking Supervision
IFRS 9 and Circular No. 855 • Circular No. 855 adopted the “expected loss” concept. • Under Circular No. 855, all FIs are expected to develop a sound loan loss methodology that can reasonably estimate provisions for loans and other credit accommodations and risk assets in a timely manner No undue cost and effort
• Adequate documentation of decisions made, policies and processes put in place, and assumptions used; • Control measures in the exercise of judgment • Competencies of internal audit and compliance functions
Use of Sound Judgment • Take into account business and economic environment • Eliminate or mitigate biases
15
From IAS 39 to IFRS 9 IAS 39 • • •
Memo to BSFIs Circular No. 494 Provisioning Circular No. 512 FRP
IFRS 9 Circular Nos. • 708 • 733 • 761
2005 2011/12
Circular No. • 912
2016
FULL ADOPTION
2018
IFRS 9 The final version of the Standard was issued in July 2014. Full implementation by January 1 2018.
Classification and Measurement
Impairment
Hedging
Classification and Measurement IAS 39
IFRS 9* FVTPL
Held for trading
Classification and Measurement
Available-forsale Held-to-maturity
FVOCI HTC (Amortized Cost)
*Fair value through profit or loss (FVTPL), Fair value through other comprehensive income (FVOCI)
Classification and Measurement
IBODI
HTM
AFS
HTC
FVOCI
IFRS 9 The final version of the Standard was issued in July 2014. Full implementation by January 1 2018.
Classification and Measurement
Impairment
Hedging
Impairment - Background IAS 39 Objective evidence that a loss had been incurred before measuring the loss
Impaired (e.g. NPL)
Unimpaired
Too little, Too late
Impairment - Expected Credit Losses (ECL) • Based on an expected credit losses model • Future-focused and more timely loss recognition
• Principles-based accounting standard geared towards the earlier recognition of impairment losses
Impairment – The Three (3) Stages Bucket 1
Bucket 2
(no significant increase in credit risk)
(with significant increase in credit risk) To compute ECL
Bucket 3
(impaired)
Example
Principle 18 The supervisor determines that banks have adequate policies and processes for the early identification and management of problem assets, and the maintenance of adequate provisions and reserves.
Basel Core Principles for Effective Banking Supervision
IFRS 9 and Circular No. 855 • Circular No. 855 adopted the “expected loss” concept. • Under Circular No. 855, all FIs are expected to develop a sound loan loss methodology that can reasonably estimate provisions for loans and other credit accommodations and risk assets in a timely manner No undue cost and effort
• Adequate documentation of decisions made, policies and processes put in place, and assumptions used; • Control measures in the exercise of judgment • Competencies of internal audit and compliance functions
Use of Sound Judgment • Take into account business and economic environment • Eliminate or mitigate biases
15
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