The Bank Statement is KPMG’s quarterly banking newsletter.

It provides updates on IFRS developments that directly impact banks, and considers the potential accounting implications of regulatory requirements.

Download the latest issue to read about the developments in Q1 2017. Previous issues can be found on our IFRS Newsletters web page.

And visit our IFRS for Banks and IFRS – Financial instruments hot topics pages for more on these and other related developments.

Under IFRS 9 Financial Instruments, the principles-based approach to the measurement of impairment leaves significant room for interpretation and judgement.

One of the most prominent areas of judgement relates to the stage transfer criteria, which determine whether a loss allowance is measured as 12-month expected credit losses (ECLs) (Stage 1) or lifetime ECLs (Stage 2).

Determining whether there has been a significant increase in credit risk since initial recognition – and therefore whether to transfer to Stage 2 – is challenging.

“Staging is one of the most material and complex elements of the new IFRS 9 impairment model for financial instruments.”

Dr Jürgen Ringschmidt, Richard Nußbaum and Christian Maaß, KPMG in Germany

This article explores some of the challenges and describes one possible approach to operationalising the requirements.

Regulators expect banks to provide increasingly more qualitative and quantitative information as the implementation of IFRS 9 and the other new standards progresses.

So in our regular quarterly ‘How do you compare?’ article, we look at disclosures that banks have made in their December 2016 annual financial statements for certain accounting standards that have been issued but are not yet effective. 

There’s more news in our regular sections on IFRS 9 and the IASB’s activities, including a proposed narrow-scope amendment for symmetric ‘make-whole’ prepayment options included in financial assets.