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 impairment requirements in IFRS 9 Financial Instruments 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.

In September 2023, EFRAG published its comment letter in response to the IASB RFI.

In its comment letter EFRAG noted that the impairment requirements in IFRS 9 generally work as intended and 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 suggested the IASB to address the following application issues or diversity in practice:

• Cash shortfalls used to measure expected credit losses - 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 in IFRS 9.
  

• More guidance in the form of illustrative examples and/or educational material to enhance the quality and comparability of credit risk disclosures.

In addition, EFRAG recommended the IASB to consider a number of other issues with medium priority.

In November 2023, the IASB started its discussions of the feedback on the RFI. In May 2024 the IASB completed its redeliberations on the project. The IASB members agreed that sufficient work has been completed to conclude the PIR. 

On 4 July 2024, the IASB published the project summary and feedback statement, in which the IASB concluded that the impairment requirements are working as intended and result in more timely recognition of credit losses; raise no fundamental questions; provide useful information to investors with some credit risk disclosure requirements requiring targeted improvements and can generally be applied consistently with some areas requiring further clarification and application guidance.

The IASB will explore whether it can clarify the requirements for modification, derecognition and write-off of financial instruments and the consequential effect on recognition of expected credit losses as part of its project on Amortised Cost Measurement.

The IASB has also added a project to its research project pipeline to explore whether the IASB can make targeted improvements to the credit risk disclosure requirements in IFRS 7 Financial Instruments: Disclosures.

The IASB concluded that its PIR of the impairment requirements in IFRS 9 was complete and that no further work on the project was required.