Workshop to focus on financial reporting standards
October 7, 2017 | 4:57 PM
by Times News Service
Davis Kallukaran, managing partner at Crowe Horwath Oman. - Supplied picture

Muscat: A workshop is being organised on Monday by Crowe Horwath at the Sheraton hotel to make the implementation of IFRS 9 easier for the banks and non nanking financial company's (NBFC’s). The event is being inaugurated by Nasser Al Rawahy, deputy president of The State Audit Institution.

The workshop will be led by eminent faculties from Singapore, United Kingdom and Dubai to address the participants on the intricacies of international financial reporting standards (IFRS 9), readiness from IT perspective and challenges ahead.

“IFRS 9 sets out the requirements for recognising and measuring financial assets and liabilities and some contracts to buy or sell non-financial items. It fundamentally shifts the approach entities must take when analysing loans for impairment. The standard addresses processes and system issues to be addressed in order to successfully adopt the expected credit losses (ECL) model of impairment and is especially relevant to financial institutions” said Davis Kallukaran, managing partner at Crowe Horwath Oman.

“Earlier international accounting standard (IAS 39) was introduced in 2005 with the aim to prescribe unified rules for reporting of the financial instruments so that companies presented them in a transparent and a consistent way. The standard was extremely complicated and contained too many exceptions, inconsistencies and derogations. Therefore, International Accounting Standards Board decided to rewrite and replace IAS 39 with IFRS 9 applicable from January 1, 2018” said Sridhar Sampath, who is the lead faculty at the workshop.

“Since the comparative figures of 2017 may have to be restated it is advisable to start the application from 2017 itself. Some of the regulators have insisted on the compliance from 2016 itself in bits and pieces every quarter so that the full impact may not be reflected in 2018. For financial institutions like banks or investment houses, IFRS 9 can have serious impacts depending upon the types of financial assets that they have in their books and the extend of provisions that may be required. This may have a serious impact on the dividend distribution of the concerned entities” remarked T P Anand renowned IFRS expert who is addressing the event.

Issues and challenges

According to the global public policy committee (GPCC) report published in June 2016, certain critical aspects are to be taken care of by the entities to ensure that plans are in place to conclude on key decisions, build and test necessary models and infrastructure, execute dry/parallel runs and deliver high quality implementation by 2018. Some of the aspects to be taken care of are.

Has the entity identified all changes to existing systems, processes, including data requirements and internal controls, to ensure they are appropriate for use under IFRS 9?

How will reporting processes and controls be documented and tested, particularly where systems and data sources have not previously been subjected to audit?

What are the planned levels of sophistication for different portfolios and why are these appropriate?

What are the key accounting interpretations and judgements and why are they appropriate?

How will a 'significant increase in credit risk' be identified and why are the chosen criteria appropriate?

How will a representative range of forward-looking scenarios be used to capture non-linear and asymmetric impacts?

What KPIs and management information will be used to monitor drivers of expected credit loss and support effective governance over key judgements?

How will the IFRS disclosure requirements be met and how will those disclosures facilitate comparability?

How will implementation decisions be monitored to ensure they remain appropriate?

“The application of IFRS 9 poses quite a number of challenges for the reporting entity, one of them being the development of a risk model and to arrive at the expected credit losses (ECL). This also involves the application of an appropriate software,” said Sanjay Uppal and Vijay Krishnamoorthy, the risk modelling experts from Singapore and the UK, who are making the presentations at one of the sessions.

IFRS are applied in over 100 countries around the world, representing over 97 per cent of the world’s gross domestic product which was over $74 trillion in 2016, commented said Arqam Ayubi, director risk advisory services at Crowe Horwath Oman.

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