This article first appeared in The Edge Financial Daily on April 12, 2018

KUALA LUMPUR: Asia-Pacific banks currently adopting new accounting standards are well placed to adopt a set of new financial reporting standards that will affect almost all jurisdictions globally, according to an S&P Global Ratings report.

S&P’s “Asia-Pacific Banks Are Well Positioned To Adopt IFRS 9 Reporting Standards” report focuses on the revised impairment requirements likely to lead to an increase in provisioning, as they introduce a forward-looking “expected credit loss” impairment model compared with the previous IAS 39 “incurred loss” impairment model.

“IFRS 9 (International Financial Reporting Standards 9) came into force for accounting periods beginning on or after Jan 1, 2018, and will affect almost all banks in the Asia-Pacific region,” the international rating agency said in a statement yesterday, noting the region’s banks are currently adopting IFRS 9 or its local equivalent. However, Japanese banks are an exception as they do not apply IFRS and continue to report under Japanese GAAP, incorporating an element of expected credit losses.

S&P noted that IFRS 9 was developed in response to criticism that the previous standard IAS 39 had led to the delayed recognition of credit losses by banks. “The new standard revises the requirements for the classification and measurement of financial instruments, the impairment of financial assets, and hedge accounting.”