IFRS 9 Financial Instruments - KPMG Germany (2024)

The effects are far-reaching and the need for adaptation is considerable; early preparation for the new regulations is advisable. Business entities that have not yet come to terms with the new IFRS 9 standard have little time for an extensive and intensive transition phase.

On 24 July 2014, the IASB published the final IFRS 9 Financial Instruments standard, which replaces IAS 39. The new standard includes amended requirements for the classification and measurement of financial assets as well as a new risk provisioning model that now takes into account expected losses for the calculation of risk provisions. Furthermore, the new regulations on hedge accounting already published in November 2013 were adopted in the final IFRS 9 standard.

Since the result of the EU endorsem*nt process by the EU Commission of the IFRS 9 regulations was expected earlier, the EU published the new regulations in the Official Journal on 22/11/2016. The standard has since been effective for financial years beginning on or after 1 January 2018. Earlier application is permitted.

For the insurance industry, the Commission supports an optional temporary deferral of the effective date of IFRS 9 to ensure simultaneous application with IFRS 17. With regard to the correspondingly amended IFRS 4, the EU Commission has asked EFRAG for a recommendation on endorsem*nt.

Compared to IAS 39, the new IFRS 9 standard is based more on principles and less on individual requirements. For users, many interpretation issues arise as a result, for which a uniform approach is currently developing in accounting practice.

Furthermore, the standard entails a considerable need for adaptation: In addition to pure accounting and disclosure, product characteristics (e.g. of credit agreements), processes, organisational structures, IT systems and data requirements are also particularly affected.

Due to the scope and the profound impact on business processes, it is high time to come to grips with the new IFRS 9 standard. Get in touch with us.

The implementation of the IFRS 9 regulations requires a cross-divisional approach and methodical and procedural experience, which our team has already been able to gather in national and international business entities during the implementation of IFRS 9 projects.

KPMG’s specialists have a deep and extensive product understanding in the area of financial instruments. This includes their representation under different accounting standards and under regulatory law. Furthermore, they have a comprehensive understanding of risk management methods and processes and their implications for reporting. They also have extensive benchmark know-how for hedge accounting models and extensive experience in implementing accounting systems.

With our holistic view of your value chain, we help to exploit efficiency potentials that arise through closer networking of front office, accounting, reporting and controlling. With the help of our analysis tools, we show you the company-specific effects in strategic and operational dimensions. This includes the effects on strategy and business models as well as their management and the influence on the external presentation in the consolidated financial statements and annual report. Furthermore, we identify the complexity drivers, the impact on internal processes and the IT systems used.

We provide you with our simulation tools to estimate the quantitative effects of the new regulations on the balance sheet and P&L as well as on regulatory capital. The diverse simulation options serve as a basis for decision-making in positioning, interpreting margins and exercising options.

Using our "IFRS 9 impairment simulation tool", we can determine future risk provisioning and its development over time based on your business and credit risk data (PD and LGD). The dynamic development of your lending business can be taken into account. In addition, stress scenarios can be modelled with regard to the probability of default in order to be able to estimate the impact of changed credit risk framework conditions.

For this purpose, we will provide you with our tried and tested tools to limit case-by-case assessments as much as possible and thus minimise the time and resources required.

Our analysis tool for "iRadar" securities replicates the decision algorithms of IFRS 9 and helps you perform and document an audit-proof analysis. In addition to the initial analysis, we offer you the tool-supported option of verifying the categorisation in your securities portfolios on an ongoing basis.

For loans on the assets side, we perform portfolio screening to cluster and reduce case-by-case decisions. The remaining loans can then be analysed individually in our "Lending Tool" with regard to the product features.

We offer you support in analysing the necessary steps for the implementation of the new IFRS regulations. The first step is to analyse the expected requirements in terms of their impact on your business entity. Which requirements create only a minor need for change to achieve future IFRS 9 compliance? Which requirements require significant methodological or process-related changes or are procedurally dependent on other areas?

Based on our extensive benchmark know-how, we can perform an analysis of your adaptation requirements promptly and with a short lead time and identify alternative courses of action. In interpreting the standard, the goal of efficient implementation is pursued. We are responding to the stronger focus on risk management that is expected in the future by including all relevant corporate divisions as well as process-related and IT aspects.