Significant Increase in Credit Risk According to IFRS 9: Implications for Financial Institutions
Surrey Business School, University of Surrey, Guildford, UK
- *Corresponding Author:
- Dirk Beerbaum
Surrey Business School
University of Surrey, Guildford, UK
Tel: +44(0) 1483686300
Fax: +44(0) 1483686346
E-mail: [email protected]
Received date: July 27, 2015; Accepted date: September 24, 2015; Published date: September 29, 2015
Citation: Beerbaum D (2015) Significant Increase in Credit Risk According to IFRS 9: Implications for Financial Institutions. Int J Econ Manag Sci 4:287. doi: 10.4172/21626359.1000287
Copyright: © 2015 Beerbaum D. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
This study explores the literature about definitions and concepts when a significant increase in credit risk is
achieved. In response to the financial crisis the IASB has introduced a new standard (IFRS 9) on impairment, which requires a three-step approach, which in general replaces the current incurred impairment model with a new expected loss model. This research paper summarizes alternative impairment models and particuarly focus on the significant detreortaion criteria, which is a corner stone of the new IFRS 9 impiamrnet model. The expected loss model is not completely new within the accounting literature. The study provides early insights into implemention of IFRS 9 on impairment, as IFRS 9 will become applicable 2018. It is also relevant for regulators, as it becomes obvious due to the non-existance of a dominant approach; the question arises if the regulator should provide more guidance to avoid that all companies purse completely different model resulting in decreasing comparability for investors.