The Comparison between IFRS 9 Impairment Model and Basel-IRB Expected Credit Loss Model

• Main Authors: Hsu,Mei-Yen, 徐美燕
• Other Authors: CHANG, CONRAD-C.
• Format: Others
• Language: zh-TW
• Published: 2015
• Online Access: http://ndltd.ncl.edu.tw/handle/13604438975749571223

碩士 === 國立臺北大學 === 會計學系 === 103 === The International Accounting Standards Board (IASB) has pronounced IFRS 9 Financial Instruments on July 24, 2014. IFRSv9 has three sections: classification and measurement; impairment; and hedge accounting. Among them, the impairment has adopted the expected loss model from the incurred loss model of IAS 39. As the expected loss model involves projections of future economic cycles, the estimation of impairment becomes complicated and affects finance industry tremendously. Thus, further investigation from the industry, supervising authorities and academia is warranted. As banking industry is a highly leveraged industry, in order to enhance the risk management of the banks, the Basel Committee on Banking Supervision (BCBS) released new Basel Agreement (Basel II) that have major revision on the calculation of credit risk. It is expected that even though the buffer capital of banks is reduced during recession, the banks can still cope with total risk. The notion of expected unrealized loss is incorporated into provisioning at the good time so that the banks can accumulate enough required capital to avoid contraction of funding at the bad time. As the two international organizations have converged on the notion of impairment, this study investigates the association between IFRS 9 and Basel Agreement. Basel allows both the Standard approach and the Internal Rating-Based (IRB) approach on credit risk provisioning. The Standard approach is too simplified for the calculation of expected loss rate and it has great discrepancy with the IFRS 9 impairment requirements. Accordingly, this study focuses only on the comparison between the Internal Rating-Based approach and IFRS 9. Through the literature review, although both of them have different application purposes, economic environment assumptions, and parameter selection, they are still helpful to make information more transparent and make the supervising authorities and the investors better informed.