IFRS 9 is now discussed since a couple of years. In 3 phases it targets to replace the existing IAS39 guidelines:
While banks target an adoption of the new Investment Accounting guidelines on Jan 1st 2018 already, Insurance companies can defer the adoption until (latest) Jan 1st 2021. The main reason for the deferral option is to avoid an accounting mismatch between assets and liabilities, as the corresponding standard for liabilities (IFRS 17, formerly known as IFRS4) will have Jan 1st 2021 as mandatory start date.
Both standards will require major efforts on business and IT side, so it appears wise, to start soon with the preparation. Also having in mind, the need to produce comparable figures already one year in advance.
Back to IFRS9: the most significant change with IFRS 9 lies in Phase 2: Impairment handling. The old IAS39 has foreseen an “occurred loss model”. Impairment Accounting needed only to be performed for assets with a significant default probability or for already defaulted assets. The criticism in this approach lies in not reflecting unexpected market movements like we saw in the financial crisis 2008ff. So IFRS9 Phase 2 requires a more forward looking “expected loss model”, that also monitors a potential credit rating deterioration over time, e.g. once Issuers like countries or organizations are rated down, the Investor needs to follow that in accounting.
SAP Investment Accounting Solutions can support Insurance Companies, Pension Funds, Banks and other Investors with comprehensive functionalities around Impairment Accounting (and other IFRS9 relevant functionalities) like
- Impairment stage handling
- book value component handling upon purchase/sale/redemption
- book value component handling at monthly/quarterly closings
SAP can act as an IFRS9 only solution next to your existing local GAAP solution or can offer to be a comprehensive Multi-Ledger, Multi-Currency, Multi-Asset Class platform.
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