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Financial instruments — Impairment


This is a joint IASB-FASB project to consider how impairment of financial assets should be measured and recognised, and forms part of the IASB's comprehensive project on financial instruments.

Currently, IAS 39 Financial Instruments: Recognition and Measurement recognises impairment of financial assets using an 'incurred loss model'. An incurred loss model assumes that all loans will be repaid until evidence to the contrary (known as a loss or trigger event) is identified. Only at that point is the impaired loan (or portfolio of loans) written down to a lower value.

This project is considering various forms of the 'expected loss' approach, whereby expected losses are recognised throughout the life of a loan or other financial asset measured at amortised cost, not just after a loss event has been identified. Under the expected loss approach, losses are recognised earlier than the incurred loss model. Proponents of the expected loss model believe it better reflects the lending decision.


Current status of the project

The IASB published Exposure Draft ED/2013/3 Financial Instruments: Expected Credit Losses on 7 March 2013, with a comment deadline of 5 July 2013.  A finalised IFRS (additional chapter of IFRS 9 Financial Instruments) is expected in the second quarter of 2014.


Project milestones

18 June 2009 Request for Information on expected loss model published Comment deadline 1 September 2009
5 November 2009 Exposure Draft ED/2009/12 Financial Instruments: Amortised Cost and Impairment published Comment deadline 30 June 2010
November 2009 Expert Advisory Panel formed
31 January 2011 Supplement to ED/2009/12 Financial Instruments: Amortised Cost and Impairment published Comment deadline 1 April 2011
7 March 2013 Exposure Draft ED/2013/3 Financial Instruments: Expected Credit Losses published
Comment deadline 5 July 2013

Related Discussions

  • IASB activities update

  • Feb 24, 2014

  • IASB Chairman Hans Hoogervorst and others from the IASB provided an update on recent IASB activities.

  • Financial instruments – Impairment

  • Jan 23, 2014

  • The IASB concluded its redeliberations on the clarifications and enhancements to the proposals in the Exposure Draft: 'Financial Instruments: Expected Credit Losses'. The IASB considered the proposed presentation and disclosure requirements in the ED.

  • Financial instruments — Impairment

  • Dec 12, 2013

  • The Board was presented with a summary of the discussions to date as regards loan commitments and financial guarantee contracts and discussed the transition requirements.

  • Financial instruments — Impairment

  • Oct 31, 2013

  • During this session the IASB discussed when to recognise lifetime expected credit losses, operational simplifications, measurement of expected credit losses, and modifications.

  • IASB Chairman and Senior Technical Directors’ reports

  • Oct 17, 2013

  • The IFRS Foundation Trustees received a report from Mr Hoogervorst (IASB Chair) and senior technical directors. An update on the operation of the Accounting Standards Advisory Forum (ASAF) was received, and various IASB projects were discussed.

  • Financial instruments — Impairment (IASB-FASB)

  • Sep 17, 2013

  • The Boards each began re-deliberations of their respective expected credit loss models. Both Boards participated in the discussions, but each Board only made decisions on their respective papers.

  • Impairment (IASB and FASB)

  • Jul 23, 2013

  • The Board discussed feedback from outreach activities, field work, and comment letters on the proposals in Exposure Draft 'Financial Instruments: Expected Credit Losses' as well as constituents’ feedback on the FASB impairment proposals.

  • IASB projects review

  • Jun 10, 2013

  • Sue Lloyd and Alan Teixeira provided the IFRS Advisory Council with a review the current work of the IASB.

  • Update from the IASB

  • Apr 11, 2013

  • A report was given by Chairman Hans Hoogervorst on the Accounting Standards Advisory Forum, the Effects Analysis working group, and updates on current projects.

  • Impairment

  • Apr 09, 2013

  • The ASAF was presented with a high-level summary by the IASB and FASB staff of their respective Impairment proposals.

  • Insurance contracts

  • Dec 14, 2012

  • The Board discussed and decided on the residual margin measurement of insurance contracts and the impairment of reinsurance contracts in the financial statements.

  • Financial instruments — Impairment (IASB only)

  • Dec 14, 2012

  • The Board continued discussion of its proposed ‘three-bucket’ impairment model in discussing the following topics: 1) Transitional requirements; 2) Due process considerations; and 3) Re-exposure, comment period and permission to draft.

  • Impairment (IASB only)

  • Nov 21, 2012

  • Following from the earlier education session, the IASB held a decision making session to discuss: (1) criteria for recognition of lifetime expected losses (2) methods and information to assess expected losses and transfer criteria (3) Disclosures applicable to entities applying the simplified approach for trade and lease receivables.

  • Impairment — Education session (IASB only)

  • Nov 19, 2012

  • The Board held an education session discussing criteria for recognition of lifetime expected losses; methods and information to assess expected losses and transfer criteria; and disclosures applicable to entities applying the simplified approach for trade and lease receivables.

  • Financial Instruments: Impairments

  • Jul 20, 2012

  • The Board discussed the presentation of interest revenue, the application of the proposed expected loss model to assets reclassified from FVTPL, disclosures specific to IFRSs and transition.

  • Financial instruments – Impairment

  • May 21, 2012

  • The IASB and FASB discussed whether an entity should apply the proposed “three-bucket” expected-loss impairment approach to lease receivables, including those recognised under (1) the proposed receivable and residual leases model and (2) existing lease standards