Cover note (Agenda Paper 27)

At this meeting, the IASB discussed the summary of the feedback received in response to its Request for Information (RFI) Post-implementation Review—IFRS 9 Financial Instruments—Impairment and a plan for the next phase of the project. The IASB was not asked to make any decisions at this meeting. Instead, the staff asked whether IASB members have any comments or questions on the summarised feedback or the plan for the next phase of the project presented.

Feedback summary (Agenda Paper 27A)

This paper summarised the feedback received in response to the RFI.

Overall, the post-implementation review (PIR) feedback was very positive. Almost all respondents agreed that the impairment requirements in IFRS 9 result in more timely recognition of credit losses compared to IAS 39. They said applying the requirements helped resolve the ‘too little, too late’ problem identified during the financial crisis. The requirements work as intended with no fundamental questions. .

Most respondents commented that applying the requirements during periods of uncertainty, such as the COVID 19 pandemic or the recent geopolitical and economic uncertainties, demonstrated the model is based on robust principles. However, some respondents said the requirements have yet to be tested in a scenario of significant defaults. Other respondents noted the increased use of judgemental management overlays, rather than statistical models, to respond to these uncertainties. In their view, this practice highlights the limitations of scenario analysis.

Although the PIR feedback did not identify any fatal flaws, respondents identified specific matters where entities experience application challenges and diversity in practice, mostly in areas that require use of judgement. Respondents also expressed concerns over the lack of consistency in the credit risk disclosures. Most PIR feedback focused on:

• Application issues arising from the interaction between the impairment requirements and the requirements in IFRS 9 for modifications, derecognition and write-off
• Diversity in application of, and potential improvements to, the disclosure requirements on credit risk in IFRS 7

Respondents generally suggested that the IASB should make specific improvements, mainly in the form of application guidance or illustrative examples. In their view, major amendments are not justified in the light of the overall positive experience with the impairment requirements and the significant implementation costs incurred.

IASB discussion

IASB members noted that the comments received are an affirmation that the objective of the impairment requirements introduced under the Standard is met and the requirements are working as intended. They acknowledged the comments around diversity in practice on disclosure requirements on credit risk and different ECL model outcomes. However, they considered the diversity is to a large extent inevitable regardless of any further interpretation guidance that could be produced. This is due to inherent judgement involved. They also acknowledged based on the comments received that the impairment requirements as set in the Standard might be burdensome in the context of intracompany assets. However, the requirements still remain highly relevant for users and as such they do not believe there should be a scope exception for them. Regarding application issues from the interaction between impairment and modification/derecognition requirements in the Standard, IASB members expect a deeper analysis of the topic.

IASB members highlighted that while responses suggested a need for further education material, illustrative examples and application guidance, the IASB needs to exercise significant caution and the material will only be produced if there is a critical need and only in limited circumstances.

Plan for PIR Phase 2 (Agenda Paper 27B)

The staff proposed to discuss the following topics in the first half of 2024:

• General approach to recognising ECL
• Determining significant increases in credit risk
• Measuring ECL
• Purchased or originated credit-impaired
• Interaction of impairment requirements with other requirements
• Credit risk disclosures

IASB discussion

There was no significant discussion on this paper.