Global banks do not believe that the world's accounting standard-setters are on track to converge financial instruments accounting requirements, even though many banks support convergence of standards entirely.
The view follows a poll among 70 banks - from Europe, the Middle East and Africa, Asia Pacific and North America by Deloitte - which was published in its Third Global IFRS Banking Survey: Still far from land?
The firm canvassed the opinion of international lenders regarding their views on proposals surrounding IFRS 9, Financial Instruments, which, if adopted, would be used by the world's leading non-US financial institutions to report their performance and balance sheet position.
This is part of a wider effort by the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) to converge their financial instruments accounting standards.
However senior business figures have increasingly cited the programme a disappointment - the Financial Reporting Council's chairman, Stephen Haddrill, referred to it as a 'failure' while E&Y's global leader for IFRS services, Ruth Picker, recently commented that many in Europe are 'fed up with the convergence programme with the Americans'.
Deloitte's report reveals doubt among lenders as to whether a final IFRS 9 can be rolled out in time for its mandatory effective date of 1 January 2015, in accordance with the convergence programme. According to the study, 76% of banks surveyed think the timeline for a final IFRS 9 will be deferred further from the effective 1 January 2015 date. As a result, banks are delaying the start of their implementation projects until the second half of 2013 or later.
Two-thirds (69%) of banks surveyed favour the IASB's proposed expected loss impairment model compared with the FASB's. According to the banks, this is because the IASB's proposed expected loss model would better reflect business performance; have a more favourable regulatory impact; and result in lower earnings volatility.
Yet many of the banks surveyed believed the FASB's proposal would provide better comparability between peers and would be easier to implement than the IASB's proposed model.
Deloitte's global IFRS banking leader, Mark Rhys said that getting banks' accounting right is paramount.
'Impairment accounting is particularly important for investors and regulators and has implications for capital. A lack of convergence on impairment could inadvertently lead to differing capital needs for IFRS and US banks.
'Capital requirements, which are already increasing in many countries, may rise further to reflect the higher provisioning levels likely to be mandated by both IASB and FASB. This will potentially drive up the cost to banks of providing certain lending products.
'The accounting changes discussed in the survey are being implemented alongside significant regulatory change, lending expectations, low interest rates and recession affecting many banks. Until the IASB finalise their impairment proposals, the continuing uncertainty is such that many banks will not make their IFRS9 projects a priority in the near future,' said Rhys.
