Many banks are currently discussing their key IFRS 9 ECL accounting policy and implementation decisions, before then commencing model builds and IT implementation based on those decisions. Governance failings that lead to initial IFRS 9 implementation decisions being changed later could be extremely costly and jeopardise project delivery. Additional uncertainties around how the final guidance of Basel, the Enhanced Disclosure Task Force (‘EDTF’) and the IFRS Transition Resource Group (‘ITG’) will be applied in practice, as well as general emerging industry practice, add to the complexity in decision making.
Given the significant impact that IFRS 9 ECL will have on banks, there are a wide range of stakeholders with a strong interest in these decisions and how IFRS 9 is implemented. These include senior management, audit committees, regulators, shareholders, investors, analysts and auditors. Getting governance right will therefore be key to making effective accounting policy and implementation decisions, that can be justified to internal and external stakeholders, both at implementation and in the future.
But this isn’t easy.
There are a range of challenges and issues we see that need to be considered in designing and operating an effective governance process over IFRS 9 ECL accounting policy and implementation decisions, which are summarised below.
Each of these areas is discussed in more detail over the following pages, along with our perspectives on how best to address the individual challenges presented. However, the use of a Project Management Office (‘PMO’) to build these individual responses into an overall project plan and track progress, will be one way of ensuring an effective, co-ordinated response to the various challenges faced.