Banks and credit granters are facing an uphill battle since the launch of the new IFRS9 Financial Reporting Standard, which came into effect on 1stJanuary 2018. The new financial standard has credit granters frantically trying to ensure that they are now reporting in line with a far more detailed and transparent accounting standard compared to legacy methods (IAS39).
The focus of the new standard is correcting the previous backward-looking asset classification standard by incorporating future projections and scenarios (Expected Credit Loss – ECL), which is an understandable reaction to the financial crises seen around the world over the past decade. The new standard is forcing credit granters to adopt a completely new level of sophistication in their valuation methods, and an array of new principles in the form of life-time estimations calibrated by macro-economic drivers that need to be validated and proven upon audit.
Even in the Middle East, where there has been a considerably different business operating model often based on ‘subjective partnerships’, organizations will have to drastically alter their policies and their adherence will be tested. Geographical locations where data collection and storage have not been a priority over the past 10 years will suffer the most.
To download the Qarar IFRS 9 Whitepaper click on this link