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IFRS 9: would new standard have stopped Greek banking crisis?

It’s no secret that the countdown is now on for the implementation of the new, global accounting standard, IFRS 9, Financial Instruments, which must be implemented and fully compliant by January 2018. Damien Burke, head of regulatory practice at 4-Most Europe, asks whether IFRS 9 could have stopped the Greek banking crisis

Among other things, IFRS 9 addresses how to recognise and account for credit losses (impairment) and will require serious thought, cooperation and investment from the industry, not only to meet the requirements but also to reach the end goals that is has been designed to achieve.

The new standard is a distinct departure from the current IAS 39, Financial Instruments: Recognition and Measurement, in that it focuses on accounting for expected credit losses as opposed to incurred losses.

The move to change IAS 39 was escalated as a result of the financial crisis of 2007/08 and the fallout in terms of banks having to be bailed out by public money.

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