IFRS 9 on Financial instruments: impact of the ECL model

Abstract

During the crisis, the delayed recognition of losses on loans and other financial assets was recognized as a major source of weakness of the accounting standards in force. For this reason, accounting policies have been the subject of particular attention from legislators and the IASB. The IFRS 9 on “Financial Instruments” has been issued in substitution of the IAS 39. Its application, starting from January 2018, introduces a new classification and measurement model of financial instruments, the adoption of a new criteria of valuation of the expected losses, the impairment, and the definition of new rules to estimate the hedging instruments. These changes will lead to an increase in credit risk and will call for the collection of new data and different and more complex evaluation processes. The present thesis is aimed at trying to estimate the impact that the expected credit losses model will have on the current systems and processes of entities; moreover, it will try to estimate the effect on regulatory capital and in the reduction of equity.