Ifrs 9 and Implications of “Business Model vs. Management Intent” Criteria on the Quality of Accounting Information

Knežević, Goranka; Vukadinović, Predrag; Pavlović, Vladan

doi:10.15308/finiz-2015-22-26

Cited by 7 publications

(7 citation statements)

References 2 publications

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“…This is because the new standard prevents managers from exploiting the subjectivity to classify the instruments in the portfolio with which the accounting policy is associated (i.e., fair value, amortised cost or cost) that better fit with their earnings, book value and/or, in the case of financial entities, regulatory capital targets (Elnahass et al 2018). So, while management intent was criticised as being quite a vague rule, where no evidence of intent is disclosed in the footnotes, the business model introduced by IFRS 9 presents more formal criteria for classification (Knežević et al 2015).…”

Section: Previous Research and Hypothesis Developmentmentioning

confidence: 99%

The effect of corporate governance and investor protection environments on the value relevance of new accounting standards: the case of IFRS 9 and IAS 39

Mechelli

Cimini

2020

J Manag Gov

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The first-time adoption of IAS/IFRS accompanied by the issuance of new international accounting standards has provided mixed results regarding their ability to improve accounting quality. A possible reason is that not only the quality of the standard-setting process, but also other factors might affect accounting quality and one of its dimensions, namely, value relevance. By analysing data from a sample of 316 financial entities listed in 43 countries from all over the world and adopting IFRS 9 in place of IAS 39 as of 1st January 2018, this paper tests whether the quality of firm-level corporate governance and country-level investor protection environments affects the value relevance of equity values calculated according to the requirements of IFRS 9 and IAS 39. The results suggest that, despite both accounting standards providing investors with value relevant information, in the presence of high-quality corporate governance or a high-quality investor protection environment, IFRS 9 is more value relevant than IAS 39, whereas the opposite is true in the presence of low-quality corporate governance or a low-quality investor protection environment. The research results provide the first empirical evidence of the value relevance of the new accounting standard on financial instruments and contribute to the debate on the existence of other factors that, together with the quality of the IASB standards, affect the quality of financial reporting.

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Section: Previous Research and Hypothesis Developmentmentioning

confidence: 99%

The effect of corporate governance and investor protection environments on the value relevance of new accounting standards: the case of IFRS 9 and IAS 39

Mechelli

Cimini

2020

J Manag Gov

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“…Both business model classification and application of the SPPI test could lead to less subjectivity compared to the management intent used to classify financial instruments under IAS 39 rules (Elnahass et al, 2018). Hence, while management intent has been criticized for being quite a vague rule, where no evidence of intent is disclosed in the footnotes the business model introduced by IFRS 9 presents more formal criteria for classification (Knežević et al, 2015). However, IFRS 9 has been subject to some controversy: while on one hand, it seems that financial asset classification is less subject to management intention, on the other hand, some studies (Bholat et al, 2018) have found more discretion in the calculation of ECL that involves a high degree of judgment based on forward-looking information, which may lead to greater divergence in practice than in the case of incurred loss.…”

Section: Research Backgroundmentioning

confidence: 99%

Value relevance of IFRS 9: The influence of country factors and heterogeneous strengths in the European banking sector

Zampella,

Ferri

2023

Financ Manag Account

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This study focuses on investor reactions to financial instrument recognition and measurement in the banking sector under the new International Financial Reporting Standard (IFRS) 9, Financial Instruments. The research tests the combined value relevance of accounting numbers before and after the mandatory transition to IFRS 9 in Europe. Furthermore, we verify the influence of country factors and heterogeneous strengths on the value relevance of the aforementioned standard. To this end, we adopt a sample consisting of 215 banks listed in Europe, for the years 2015–2020. We find a significant change in the explanatory power of value‐relevance regressions in 2015–2017 compared to 2018–2020. In addition, we find that accounting numbers have incremental value relevance in countries characterized by “good” governance indicators and high heterogeneous strength, namely investors pay attention to the strength of the bank authority. This study makes three main contributions to the literature. First, it complements the IFRS 9 literature by providing new evidence. Second, its insights can be used to support investment decisions. Last, the findings help regulators and standard‐setters to verify the impact of the new measures delineated by the standard.

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“…For example, Mechelli et al (2020a) conclude that IASB (2019), IFRS 9 is more relevant than IASB (2014), IAS 39 in countries with high-quality corporate governance and investor protection, whereas it is the opposite in countries where such a quality is low. According to Knežević et al (2015), the change from IASB (2014), IAS 39 to IASB (2019), IFRS 9 did not meet the goals regarding comparability of financial statements and possible earnings volatility.…”

Section: Literature Reviewmentioning

confidence: 99%

IFRS 9 Single Impairment Model: Semantics and Circularity? A Study in the Airline Industry

Bellandi¹

2021

IJBM

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This paper studies a sample of airlines reporting under International Financial Reporting Standards (IFRS) about three specific challenges in implementing International Accounting Standards Board (IASB) (2019), IFRS 9 requirements for impairment versus IASB, 2014, IAS 39: 1) expected versus incurred credit losses; 2) impairment scoping and elective simplifications; and 3) definition and use of default. First, there appears to be a strong indicator that the way airline companies have drawn the line between what future conditions should or should not be considered in estimating expected versus incurred credit losses has maintained the fundamental tenet in IFRS of representing the condition existing as of the end of the reporting period. Second, evidence of companies quests for IASB (2019), IFRS 9 impairment simplifications attests to the criticism that the alleged single model of impairment is in effect a complex collection of different techniques. Finally, the degree of specific application that IASB (2019), IFRS 9 requires for the definition and use of default, as well as the customization of what triggers a significant change in the risk of default since initial recognition, does not appear to have been fully received, and sufficiently disclosed in the financial statements.

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Ifrs 9 and Implications of “Business Model vs. Management Intent” Criteria on the Quality of Accounting Information

Cited by 7 publications

References 2 publications

The effect of corporate governance and investor protection environments on the value relevance of new accounting standards: the case of IFRS 9 and IAS 39

The effect of corporate governance and investor protection environments on the value relevance of new accounting standards: the case of IFRS 9 and IAS 39

Value relevance of IFRS 9: The influence of country factors and heterogeneous strengths in the European banking sector

IFRS 9 Single Impairment Model: Semantics and Circularity? A Study in the Airline Industry

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