FINAL REPORT ON GUIDELINES ON UNIFORM DISCLOSURE OF IFRS 9 TRANSITIONAL ARRANGEMENTS

Executive summary

On 22 November 2016, the International Financial Reporting Standard 9, ‘Financial Instruments’ (IFRS 9), was adopted in the EU to replace the previous accounting standard, i.e. International Accounting Standard 39, ‘Financial Instruments: Recognition and Measurement’ (IAS 39). On 12 December 2017, the EU adopted Regulation (EU) No 2017/2395 of the European Parliament and of the Council amending Regulation (EU) No 575/2013 as regards transitional arrangements for mitigating the impact of the introduction of IFRS 9 on own funds and for the large exposures treatment of certain public sector exposures denominated in the domestic currency of any Member State (the ‘new Regulation’). The new Regulation inserts a new Article 473a in the CRR, which includes provisions on transitional arrangements for the introduction of IFRS 9 and IFRS 9-like expected credit loss models (analogous ECLs1), in order to mitigate the impact of the impairment requirements resulting from IFRS 9 on capital and leverage ratios.

Article 473a of the CRR requires institutions that apply transitional arrangements for IFRS 9 and analogous ECLs to disclose the effect of these transitional arrangements on own funds, risk-based-capital ratio and leverage ratio. In particular, these institutions are required to disclose the amount of own funds, the amount of Common Equity Tier 1 capital, the amount of Tier 1 capital, the Common Equity Tier 1 capital ratio, the Tier 1 capital ratio, the total capital ratio and the leverage ratio with and without the application of the transitional arrangements.

Finally, paragraph 10 of Article 473a of the CRR also includes a mandate for the EBA to issue guidelines on disclosure requirements in relation to transitional arrangements for IFRS 9 or analogous ECLs. It is on the basis of this mandate that the EBA has drafted these guidelines, which specify a uniform disclosure format for the institutions’ disclosure requirements on transitional arrangements for IFRS 9 or analogous ECLs, with the aim of achieving consistent and comparable disclosure among institutions.

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