International Financial Reporting Standard (IFRS) 9 and Application of Example Portfolio for Calculation Expected Loss in Banking

Abstract

"International Financial Reporting Standard (IFRS) 9 Financial Instruments" which replaces "International Accounting Standard (IAS) 39 Financial Instruments: Recognition and Measurement". The aim of IFRS 9 is to present relevant and useful information to users of financial statements for their evaluation of amount, timing and uncertainty of an company’s future cash flows. IFRS 9 includes recognition and measurement of financial assets and liabilities, hedge accounting and expected loss (impairment) for the purpose of supplying the needs of interested parties. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, however draft standard is explanined that early adoption will be allowed for businesses wanting on condition the disclosure in the footnotes. Banking Regulation and Supervision Agency (BRSA) makes an effort bringing in compliance with IFRS for calculation of implemented potential losses currently. Therefore, BRSA is demanded parallel computations in order to make impact analysis from banks on condition beginning from 2017. It is aimed that harmonization to international financial reporting standards of practices in Turkey about expected loss (impairment) by implementing a similar structure that is located Quantitative Impact Study guide in our country. This paper aims to perform an application an example portfolio in banking to provide understandability of this standard which has not been enacted yet.