ICAEW: GCC financial organisations must speed up their efforts and get ready for IFRS 9

GCC banks and financial institutions must speed up their efforts in preparing for International Financial Reporting Standards (IFRS) 9 or risk non-compliance when the new financial instruments standard is introduced on 1st January 2018, according to accountancy and finance body ICAEW.

This was the narrative of a recent joint briefing session organised by Dubai Financial Services Authority (DFSA) and the Institute of Chartered Accountants in England and Wales (ICAEW). The briefing was attended by publicly listed companies, DFSA Registered Auditors, ICAEW members and other stakeholders.

Moderated by Bryan Stirewalt, Managing Director Supervision, DFSA, the session included a panel discussion with industry experts Asim Rasheed, Group Financial Controller, Emirates NBD; Neslihan Alankus Erkazanci, Chief Financial Officer – MENA, HSBC Bank Middle East Limited; Trevor Skinner, Banking Supervision Expert; and Zulfiqar Unar, Director Capital Markets and Accounting Advisory Services, PwC.

Following an introduction by Ian Johnston, Chief Executive, DFSA, panellists agreed that IFRS 9 is a game changer for all organisations in the market. However, the implementation process is complex and the key to ensuring compliance is to start preparing now to instigate the required change.

Panellists explained that IFRS 9 introduces changes to the classification, measurement and impairment assessment requirements for financial instruments as well as new requirements for hedge accounting. It will change the way in which banks and other financial institutions account for loan losses on their balance sheets, imposing a longer, more forward-thinking view.

Michael Armstrong, FCA and ICAEW Regional Director for the Middle East, Africa and South Asia (MEASA), said: “IFRS 9 is a comprehensive response to the financial crisis and is intended to provide a more accurate and timely presentation of financial institution reporting, particularly in relation to loan losses.

“While preparation for IFRS 9 requires time and money, it will bring financial institutions into a new world of forecasting.”

Panellists agreed the biggest challenge facing regional financial organisations when it comes to IFRS 9 implementation is data collection. Other challenges include accounting related matters, creation of IT solutions to comply with the new rules, alignment of stakeholders, and a lack of risk management expertise.

Panellists explained that IFRS 9 requires entities to consider macroeconomic factors in determining provisioning levels. This requirement might be difficult and complicated for multinational organisations operating in different jurisdictions.

Speakers also urged management of banks and financial institutions not to wait for regulators to make suggestions about their reporting practices. Instead, they should take a judgment call, forecast macroeconomic factors and run their own risk scenarios.