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Accounting: Financial Instruments

01 September 2014

A look at the recent changes to International Financial Reporting Standards

Banks hit by revised standard

The reported earnings of many banks are expected to be hit by recent IASB accounting reforms. The revised IFRS9, Financial Instruments, promises to introduce changes that will require banks to substantially increase loan-loss provisions in their financial statements. As a result, banks may then be forced to set aside more capital to cover the recognition of these increased reported losses, which in turn may affect lending levels. Will these IASB reforms improve reporting by banks? Critics of these changes are concerned that the impact will not achieve their purpose and cause yet more confusion.

This summer, the IASB issued a revised accounting standard, IFRS9 that replaced the former rules for reporting financial instruments

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