At the end of October, the Joint Boards of the FASB and IASB decided to postpone their efforts on Financial Statement Presentation and the Classification of Liabilities and Equity until later next year. Therefore, before Sir David steps down from the IASB, the focus of the IASB’s efforts in the next 6 months will be to release complete standards on:
- Financial Instruments (IFRS9)
- Revenue Recognition
This is on top of the imminent release next month of the revised Consolidation standard (the replacement of IAS27).
These five subjects are all fundamental to the reported performance of banking institutions. So with all the change agenda over the next 6 months, what is actually going to be required to be implemented by you as a preparer and when?
The most significant IFRS which has been issued, but not generally adopted, is IFRS9 (AASB9). Phase 1 of this standard on the Classification and Measurement of Financial Assets is currently available for early adoption in Australia today, with mandatory adoption for periods beginning on or after 1.1.2013. But why would you adopt it now? Have you assessed whether there is any potential benefit in early adoption?
The revised consolidation standard will be of critical importance to Regulated Banking entities. With the current focus on balance sheet size and sufficiency of Tier 1 ratios, the potential risk to banks of consolidating SPEs (eg managed funds and old securitisation vehicles) and the resulting Balance Sheet gross up is considerable.
With the expectation that the new standards will have staggered mandatory adoption dates, and different early adoption requirements, Preparers are starting to investigate the potential to pick a ‘sweet spot’ for adoption of these standards to obtain an ‘early mover’ advantage over segment competitors or minimise the impact of the changes to the Financial Statements and key ratios.
KPMG will continue to host a series of Breakfast Sessions in Sydney and Melbourne over the coming months to provide you with an introduction to these new standards. These sessions will provide you with an understanding of the underlying conceptual model, along with topical discussion around specific banking and financial services specific issues.
For more information please contact: