NG Ifrs9 Implementation

IFRS 9 Implementation - Time to get ready
For corporate treasurers and accountants generally, the planning for IFRS 9
implementation is going to be an important issue. A study/impact assessment
phase is recommended as a starting point of the IFRS 9 journey and entities
should focus on understanding the IFRS 9 financial and operational implications,
with outcomes being key inputs to the design and implementation phases
On 24 July 2014, the International
Accounting Standards Board (IASB)
issued the final version of IFRS 9
incorporating a new expected loss
impairment model and introducing
limited amendments to the
classification and measurement
requirements for financial assets. This
version supersedes all previous versions
and is mandatorily effective for periods
beginning on or after 1 January 2018
with early adoption permitted (subject
to local endorsement requirements).
IFRS 9 (2014) fundamentally redrafts
the accounting rules for financial
instruments. The various informational
content and transition requirements of
IFRS 9 will necessitate the need to
gradually move towards its adoption
from an early stage. This is because
transition is retrospective, whilst still
considering the provisions of IAS 8
(Changes in accounting policies,
estimates and correction of errors).
IFRS 9 introduces a new methodology
for financial instruments classification
and the incurred loss impairment model
is replaced with a more forward looking
expected loss model. This is all in
addition to the major new requirements
on hedge accounting. These
fundamental changes however, call for
careful planning. For corporate
treasurers and accountants generally,
the planning for IFRS 9 implementation
is going to be an important issue. A
study/impact assessment phase is
recommended as a starting point of the
IFRS 9 journey and entities should focus
on understanding the IFRS 9 financial
and operational implications, with
outcomes being key inputs to the
design and implementation phases.
With the implementation of IFRS 9,
entities will need to assess people,
processes, technology and controls that
will be necessary to drive an effective
implementation.
The implementation of IFRS 9 will
undoubtedly bring about a closer
integration of different functions and
skills (finance/treasury, accounting, risk
management, quantitative modelling),
inclusion of new instruments
particularly under the new impairment
framework (loan commitments and
financial guarantee contracts) and the
preparation of new methodological
framework, policies and processes. This
means that a large scale multidisciplinary project team will in many
cases be required to implement IFRS 9.
The table below highlights some of the
functions that may be involved in the
various aspects of IFRS 9's
1. Classification -
assets or both. However, many entities the standard will require considerable
judgement as to how changes in
macroeconomic factors will affect
Treasury, Risk Management and Financial control
ECLs.
2. Measurement -
Treasury, Risk management and Financial control
3. Impairment -
Risk management, Internal control, Financial control
implementation process:
Aspects of IFRS 9
Concerned departments
4. Off balance sheet transactions - Risk management, originating department, financial control
5. Hedge accounting -
Risk management, financial control
6. Disclosures -
Financial control and risk management
Why Companies need to act now!

Though IFRS 9's mandatory effective
date of 1 January 2018 may seem a
long way off, entities are strongly
advised to start evaluating the impact
of the new standard now as well as the
impact on reported results. Many
entities will need to collect and analyse
additional data and implement
changes to systems. For banks and
other financial institutions especially,
implementing the new standard will
tremendously affect how credit losses
on loan portfolios are being accounted
for. The expected impairment loss
model will indisputably bring about
bigger and volatile provisions and
implementing the new model will
require a lot of time. Non-financial
institutions on the other hand should
not automatically assume that the
impact of requirements of the new
standard will be lesser as this will
depend on the financial instruments
exposure they have and how they
manage them.
Issues to be considered
As CFO's and CRO's begin to discuss
implementation with management,
the following issues should be
considered:
Timeline as the first challenge: As at 1
January 2018, entities are expected to
be fully ready for IFRS 9
implementation. It therefore means
that internal policies and procedures,
expected loss assessment models, IT
systems etc must be fully ready to
support transition to the new
re q u i re m e n t s . M a n y f i n a n c i a l
institutions may come under pressure
even with the 2018 effective date but a
lead time of three years is generally
believed to be appropriate for all
phases of IFRS 9.
Obtaining information from current

systems. Given the retrospective
application of the Standard and the
increased disclosures, entities are
finding that an increased volume of
i n f o r m a t i o n i s re q u i re d . T h i s
information may not be readily
available from current systems, which
may not have captured and maintained
data at the level of detail required
under IFRS 9.
are finding that the classification of

financial assets is not quite as straight
forward as expected and the
integration of corporate strategy and
credit risk strategy may be required in
order to appropriately classify financial IT Systems to be adjusted. In order to
assets in accordance with the business achieve IFRS 9 compliance, even well
developed and documented
model test of IFRS 9.
impairment systems will require further
adjustments in respect of areas to be
Determination of signif icant changed/revised. Now that some
increase in credit risk. Entities are entities are slowly beginning to
required to recognise an allowance for u n d e r s t a n d t h e i r n e e d s f o r
either 12-month or lifetime expected i m p l e m e n t a t i o n a n d o n g o i n g
credit losses (ECLs), depending on reporting, they are also identifying
whether there has been a significant gaps in the tools that are currently
increase in credit risk since initial available to meet these needs. Given
recognition. The need to assess the very specific requirements of the
whether there has been a significant new Standard, information required
increase in credit risk will require new for both accounting and disclosure
data, processes and the exercise of purposes needs to be captured and
judgement.
assessed in a certain manner. To avoid
or limit manual intervention and
The need to incorporate forward reconciliations, the importance of
looking information. The Expected integrated, cross-functional tools and
Credit Loss (ECL) model is more software is becoming more apparent.
forward looking than the IAS 39 Volume of data can be very
impairment model. This is because challenging. As noted above, the new
holders of financial assets are now standard calls upon a significant
required to consider reasonable and amount of data accumulation for both
supportable information that includes accounting and disclosure purposes forecasts of future economic this is a process that cannot be
conditions when calculating ECLs. The underestimated. For example, the new
need to incorporate forward-looking standard requires the increased use of
information means that application of estimates in certain areas such as when
Check where your are
The business model test. The term

'business model' is used by IFRS 9 to
connote how financial assets are
managed and the extent to which cash
flows will result from collecting
contractual cash flows, selling financial
COSO: A Framework for enhancing Internal Control over Financial Reporting

The 2013 COSO Framework update provides an avenue for audit committees and management teams to have a fresh look at internal control and create
value in an organization. The framework can also help the regulators manage shareholders expectations as regards internal control over financial reporting.
At Deloitte we assist companies and regulators in performing the following:
1. Readiness/Gap Assessment
2. Education and Training
3. Implementation of COSO internal control framework
4. Review of operating effectiveness of internal control
For more information, call Jide Onabajo on +234 0 805 349 2055 or email to [email protected]
determining significant increase in

credit risk. In order to make such
estimates, an increased amount of
data will be required to be compiled
and analyzed in a meaningful manner
to ensure estimates are reliable and
appropriate.
Disclosure and communication of
financial impact. Though disclosure
requirements are not included in IFRS 9
itself but in IFRS 7 'Financial
Instruments: Disclosures', IFRS 7 has
been amended to include more
extensive qualitative and quantitative
disclosure relating to IFRS 9 such as
new classif ication categories,
treatment of own credit risk, 3-stage
impairment model new hedge
accounting requirements and
transition provisions. Designing an
IFRS 9 programme which addresses
business requirements, calls for clear
communication and management of
multiple stakeholders expectations.
The stakeholders include SEC, banking
regulators, shareholders,
management, external auditors, rating
agencies etc.
Oduware is the partner-in-charge of

Accounting and Financial Advisory
in Akintola Williams Deloitte
This publication contains general

information only and Akintola Williams
Deloitte is not, by means of this
publication, rendering accounting,
business, financial, investment, legal, tax,
or other professional advice or services.
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Akintola Williams Deloitte a member firm
of Deloitte Touche Tohmatsu Limited,
provides audit, tax, consulting,
accounting and financial advisory,
corporate finance and risk advisory
services to public and private clients
spanning multiple industries. Please visit
us at www.deloitte.com/ng

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IFRS 9 Implementation - Time to get ready

Treasury, Risk management and Financial control

Risk management, Internal control, Financial control

Risk management, financial control

Financial control and risk management

Why Companies need to act now!

Obtaining information from current

are finding that the classification of

The business model test. The term

COSO: A Framework for enhancing Internal Control over Financial Reporting

determining significant increase in

Oduware is the partner-in-charge of

This publication contains general

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