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FEE views on dynamic loan loss provisioning

  • FEE (Federation of European Accountants - Fédération des Experts-comptables Européens) (lt green) Image

25 Mar 2009

FEE, the Federation of European Accountants, has published a policy statement on dynamic loan loss provisioning for financial instruments.

FEE's main messages are:
  • If regulators allow entities to set up a dynamic provision for regulatory purposes, then part of non-distributable reserves in equity in the general purpose financial statements could be allocated as a buffer with proper note disclosures that the amount is determined in the prudential returns (by the regulatory rules);
  • FEE is not supportive of any form of dynamic provisioning in general purpose financial statements affecting net assets or performance measures of the reporting entity;
  • FEE encourages the IASB to provide further educative guidance and explanation as to how to conservatively apply IAS 39 for incurred losses since the incurred loss model is not equally applied by users in various territories;
  • Any more fundamental change of general purpose financial reporting should be subject to in depth discussions and consultation, and the full due process would need to be followed;
  • Any changes to financial reporting should be made at a global level to IFRSs to support comparability and maintain a level playing field.

Click to download the FEE Policy Statement: Dynamic Provisioning for Financial Instruments (PDF 270k).

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