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EBA report on IFRS 9 implementation

  • European Union Image

25 Nov 2021

The European Banking Authority (EBA) has published a report summarising the findings arising from the monitoring activities on the IFRS 9 implementation by EU institutions. EBA notes significant efforts in IFRS 9 implementation by EU institutions, but cautions on some of the observed accounting practices, especially in the context of the COVID-19 pandemic.

The report observes that EU institutions have made significant efforts to implement and adapt their systems to the IFRS 9 requirements since its first application date. However, the level of judgement embedded in the standard leaves open the possibility to use a wide variety of practices. In addition, the COVID-19 pandemic added to divergence. The report concludes:

  • Divergence in some accounting practices is due to the inherent flexibility embedded in IFRS 9 and the limited experience to date.
  • The COVID-19 pandemic pushed IFRS 9 models outside their boundaries, thereby increasing the use of manual adjustments, or overlays, with divergent results on the final expected credit loss amount.
  • Some practices observed, particularly in the context of COVID-19, would deserve further scrutiny from supervisors in particular to ensure a timely assessment of a significant increase in credit risk.

Please click to access the full report through the press release on the EBA website.

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