Ifrs 9, impairm ent and pro cyclicality: Is the cure wor se than the disease?

Abstract

After examining the conceptual issues underlying the debate on provisioning and procyclicality, and assessing possible financial statement impacts, this paper indicates that the accounting treatment of loan loss provisioning provides only a delayed, second-order effect on procyclicality. It also suggests that the introduction of IFRS 9 may result in some perverse consequences due to the level of subjectivity and modelling complexity involved in assessing the level of expected future credit losses.