How shall the impact of the adoption of IFRS 9 be reported in template F 12.01 “Movements in allowances and provisions for credit losses”?
It is not clear how the initial impact of the adoption of IFRS 9 should be reported in template F 12.01. We are considering 2 options:
a) According to the instructions: ‘Changes due to update in the institution's methodology for estimation (net)’ shall include changes due to updates in the institution’s methodology for estimation of expected losses due to changes in the existing models or establishment of new models used to estimate impairment. Methodological updates shall also encompass the impact of the adoption of new standards.’
As IFRS 9 is a new standard it means that the impact of the adoption of IFRS 9 shall be reported in column 070. In this case, what stock of allowances shall be included in column 010 as an opening balance broken down by impairment stages? In our understanding if c070 includes the change in allowances according to IFRS 9 impairment rules, then column 010 will include the stock of allowances of 31 December 2017 relating to only those financial assets which are measured at amortised cost or FVOCI under IFRS 9. This stock of allowances of 31 December 2017 shall be broken down by IFRS 9 impairment stages. Since debt instruments can change their classification (e. g. a loan measured at amortised cost under IAS 39 may be classified into FVTPL under IFRS 9), column 010 of F 12.01 doesn’t include allowances of 31.12.2017 which were related to those financial assets that are not subject to impairment under IFRS 9 anymore. Therefore the opening balance of allowances in c010 of F 12.01 may not be equal to the closing balance of allowances reported in the previous year’s F 12.00 template.
b) Column 070 includes the impact of the adoption of new standards except IFRS 9. Column 010 contains the stock of allowances on 1 January 2018 broken down by impairment stages. It should include the total initial impact of IFRS 9, since the impact of the new classification rules and the new impairment rules cannot be separated.
The impact of the first time adoption (FTA) of IFRS 9 involves the modification of opening balance of allowances, in accordance with IFRS 1. For this reason, the IFRS 9 FTA impact is implicitly included in column 010 ‘Opening balance’ of the template F 12.01 of Annex III to Regulation (EU) No 680/2014 (ITS on Supervisory Reporting).The amount of this column accordingly differs from the stock of allowances of 31 December 2017.
Column 070 ‘Change due to update in the institution’s methodology for estimation (net)’ of the template F 12.01 includes changes of allowances that occur during the reporting period and so do not affect the opening balance.