PIR IFRS 9 - Financial Instruments - Impairment

​The expected credit loss model is a key innovation brought by the IFRS 9 Standard. The IASB started the Post-implementation Review (PIR) of the IFRS 9 Financial Instruments impairment requirements in the second half of 2022.

In May 2023, the IASB published the Request for Information (RFI) to seek stakeholders’ views on the impairment requirements in IFRS 9 and the related disclosures with a comment period till 27 September 2023.

On 18 July 2023, EFRAG has published its Draft Comment Letter  (DCL) in response to the IASB RFI. 

In its DCL EFRAG notes that the impairment requirements in IFRS 9 generally work as intended. In general, the use of a forward-looking expected credit loss model results in more timely recognition of credit losses than applying IAS 39 Financial Instruments: Recognition and Measurement. 

Nevertheless, EFRAG identifies some issues of application or diversity in practice with different levels of priority that should be further considered by the IASB in the context of this PIR project. Those with highest priorities are:

• Cash shortfalls used to measure ECLs: EFRAG considers the IASB should clarify whether the expression “all cash shortfalls” used in Appendix A of IFRS 9 to define credit loss should be interpreted within the scope of concessions from the lender due to financial difficulties of the borrower. 

• Interaction between modification, impairment, and derecognition requirements: EFRAG considers the IASB should clarify the interaction between modification, impairment, and derecognition requirements in IFRS 9.

In addition, on credit risk disclosures, EFRAG is seeking input from its constituents on whether additional credit risk disclosure requirements are needed.

EFRAG is seeking information about the issues constituents have encountered when applying IFRS 9 impairment requirements. This may include whether the requirements are working as intended, whether they can be applied consistently, and whether they have resulted in unexpected significant effects.

EFRAG's Draft Comment Letter can be found here.  

Comments are requested by 13 September 2023.