IFRS 9 Mandatory Effective Date May be Deferred until 2015
In August 2011, the International Accounting Standards Board (IASB) has issued for public comment Exposure Draft ED/2011/3 Mandatory Effective Date of IFRS 9, whereby it is proposing to defer the mandatory effective date of the standard until 1 January 2015 (understand for annual periods beginning on or after 1 January 2015) from the original mandatory effective date 1 January 2013. Earlier application would still be permitted. Further relief from the requirement to restate comparative figures for entities voluntarily adopting the Standard before 2012 has not been provided, but feedback is sought. Comment period ends on 21 October 2011.
Brief history of the development
The ED is a result of the feedback from constituents to the Request for Views on Effective Dates and Transition Methods issued by IASB and FASB on 19 October 2010 who have indicated that they would prefer sufficient lead time after the finalisation of the last phase of IFRS 9 (which should be completed by the end of 2011) to allow them to adopt all parts of IFRS 9 at the same time. Constituents also indicated that they would prefer an extension of the comparatives restatement relief until the mandatory effective date.
How would financial statements preparers benefit from the proposed deferral?
- It will allow them to implement all the changes from each phase of the project concurrently and not as per the phased approach adopted by IFSB (which we have been critical of since its implementation)
- It will allow them to see the whole standard in its entirety before implementing it
- It will allow them to carefully consider their new classification an the transition from the old one (e.g. from the old available-for-sale classification to a new one provided by IFRS 9) in the light of the new impairment and hedge accounting (where applicable) requirements
- It will allow them sufficient time to make the necessary system adjustments and to adequately prepare for the transition
- It will potentially align the effective date of the standard with the ones of other new and revised standards (revenue recognition, leases, etc.)
- It will allow time for the resolution of a potential issue – the delay in the endorsement of Phase 1 of IFRS 9 (Classification and Measurement) by the EU which could be a potential problem in the US for SEC filers who, if the issue is unresolved, from 2013 will have to prepare two sets of accounts – one under IFRS as issued by IASB for the purposes of their SEC filings and another one under IFRS as endorsed by the EU.
- In the light of the above benefits, we are in favour of the ED and do expect that many constituents will support it, but also are hoping for a further relief from the requirement to restate comparative figures for entities voluntarily adopting the Standard before the mandatory effective date.
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