Literature Review of IFRS 9 and Its Key Parameters

Abstract

In this paper, we review the empirical literature on the accounting of financial instruments under IFRS 9. We focus on researches after the 1st of January 2018, which was the date of the first implementation of IFRS 9. We focus on three areas of work. The first area is a comparison of studies on the calculation of expected credit loss (ECL), impairments or loss allowance, and the impact on P&L. The second area is focusing on the probability of default and point in time models of loss projections which are the key parameters in ECL calculations. The third area of research comprises studies on loans, non-performing loans, and the impact on bank capital requirements. We discuss the most common studies in each field of IFRS 9 standard which are publicly available. Finally, we summarize findings on the impact of IFRS 9 introduction to stakeholders' value. Despite the multitude of researches, the available evidence doesn't allow the generalization of the question of whether the implementation of IFRS 9 has improved the loss allowance approach. One reason is that the application of the standard is effective from the 1st of January 2018 and that the insurance companies may delay the implementation of IFRS 9 until the introduction of IFRS 17 - insurance contract.