IFRS 9 has been in force for several months now. In examining how banks have applied the transitional requirements in their 2017 year-end reports, we found them adept at presenting the impacts of the new standards.

We turn now to the next challenge: disclosures required in banks' interim reports.

What to include in interim financial statements

IAS 34 defines what interim reports must disclose: namely, a complete set of financial statements as defined in IAS 1, even if a condensed report is issued. IAS 34 remains unaffected by the new amendments of IFRS 9.

The primary requirements under IAS 34 are stated in paragraphs 15 and 16A, which list the following items to be disclosed:

  • significant events and transactions (i.e. allowances for financial assets or changes for such allowances, IAS 34.15)
  • any changes in the accounting policies and methods of computation and nature and effect of these changes (IAS 34.16A(a))
  • changes in estimates relating to figures reported in prior periods (IAS 34.16A)
  • fair value for financial instruments in accordance with IFRS 13.91-93(h), 94-96 and 99, IFRS 7.25,26, and 28-30 (IAS 34.16A(j))

For banks preparing interim reports, this means extensive and demanding disclosures already.

The main challenges

Investors, analysts, and regulators will all look closely at these new requirements, especially at the impact description. Thus, critical for issuers is communicating these impacts in a clear and comprehensive way, with a high level of quality, and in sufficient detail to explain their complexity. It is not as simple as adding a new number to the old amounts—rather, it is about clearly explaining the underlying models, measurement basis, and assumptions used to arrive at the specific figures. For this it might be helpful to ask your auditors, investors, and analysts for their respective demands and expectations.

The first two quarters of 2018 will see banks' first IFRS 9 reports, which will show how they have approached the extent of disclosures and the presentation of the transition. Part of the challenge is that many accounting policies will need rewriting, since banks cannot refer to their 2017 reports.

Furthermore, although IAS 34 has not been amended, IFRS 7 now requires several new disclosures under IFRS 9, e.g. transfers between buckets, sensitivities, and additional hedge accounting disclosures. It is likely not always clear which disclosures are required, and this could lead to inconsistency between different banks' reports.

How we can support you

The impacts of the new requirements and the additional work behind them are not to be underestimated. As usual, it will take time for a best practice to be established.

To help out, KPMG has developed a quick guide for IFRS 9 where you can double check if every requirement has been taken into account. Also, check out our guide to the interim financial statements and the corresponding disclosure checklist.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.