EY recently organised its first Banking CFO forum at the W Hotel in Doha, Qatar to address the key challenges that the new IFRS on Financial Instruments will present for the banking industry.
The seminar was attended by a number of CFO’s and CRO’s representing both conventional and Islamic banks in Qatar. Discussions during the event emphasised that GCC businesses will need to understand and be prepared to integrate the new International Financial Reporting Standards (IFRS) before they come into force in the next two years. The event also highlighted that the recently published IFRS 9 will have a bigger impact on banks than any other organisation.
The theme of CFO forum was IFRS 9, the latest version of the standards promulgated by the International Accounting Standards Board (IASB). Earlier this year, IASB completed the final chapters of IFRS 9 and included them in the final version of IFRS 9 published in July 2014. The new standard is compulsory for banks and other organisations reporting under IFRS for annual periods beginning on or after 1 January 2018.
Firas Qoussous, Office Managing Partner, EY Qatar said: “Our aim is to bring together industry participants to share their views and discuss solutions to the problems that are likely to impact the industry as a whole. Financial services organisations and banks in particular, will need to manage carefully how they communicate the implementation of the new model to their shareholders and other key stakeholders. They should also recognise that the new model will require significant development of systems and processes.”
Muhammad Qaiser, Executive Director, Financial Accounting Advisory Services, EY Qatar, said: “IFRS 9 has a far more reaching impact on banks than any other organisation. The new rules are set to push banks to take a hit on their balance sheets for losses they expect to make in the future. Significant changes have also been made to the recognition, classification and measurement of financial assets (including hybrid instruments), moving from the 4-category approach in IAS 39 to a new 2-category approach. Hedge accounting, which is essential in managing P&L volatility for many banks, has also been completely reformed to address inconsistencies and weaknesses identified in IAS 39. The new model is expected to align hedge accounting more closely with a banks’ risk management and provide improved disclosures.”
Imtiaz Ibrahim, Partner, Financial Accounting Advisory Services, EY Qatar, said: “Banks and insurance companies that hold large portfolios of loans on their books will be most affected. Banks will face the cost of updating their systems and processes to move from calculating incurred loss to expected loss.”
Muhammad Qaiser presented the session on Hedge Accounting, and the Impairment and classification sessions were presented by Thimo C. Worthmann, Senior Manager, EY Frankfurt and EY’s global IFRS 9 specialist.
