IFRS 9 and its behavior in the cycle: The evidence on EU countries

Pastiranová, Oľga; Witzany, Jiří

doi:10.1111/jifm.12140

Cited by 10 publications

(14 citation statements)

References 26 publications

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“…, 2022; IASB, 2020). Pastiranová and Witzany (2022) recommend issuing regulatory guidance documents that mitigate the procyclical behaviour of IFRS 9 models. This singularity of the year 2020 may reinforce the idea that IFRS 9 is not countercyclical.…”

Section: Discussionmentioning

confidence: 99%

“…Under the IAS 39 incurred loss model, a credit default event usually makes it mandatory to reflect the corresponding loan loss provisions (Pastiranov a and Witzany, 2022). The IAS 39 model determines that losses are expected as a result of future events, regardless of how likely they are to be recognised (IASB, 2003).…”

Section: Theoretical Background 21 Impairment Model Under Ifrs Perspe...mentioning

confidence: 99%

“…The guidelines established under IFRS 9 require banks to record provisions during periods of economic expansion that reflect the probability of a change in the economic cycle (Huizinga and Laeven, 2019). Therefore, banks must consider information about the prospects of the macroeconomic environment when estimating credit losses (Pastiranová and Witzany, 2022). Therefore, in the process of transitioning to the expected credit loss model, an increase in impairment losses and a negative impact on bank equity were expected.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

See 2 more Smart Citations

Income smoothing management and loan loss provisions in the banking system

Gómez-Ortega,

Licerán-Gutiérrez,

Horno-Bueno

2023

JRF

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PurposeThe “public interest” of financial institutions was used as an argument to intervene in accounting practices. The Bank of Spain's standard was not compatible with International Accounting Standard (henceforth IAS) 39 and the Spanish banking sector had become one of the most provisioned in Europe. This makes it an interesting case study of the relationship between provisioning and income smoothing. The 2008 financial crisis revealed that provisions were insufficient and a reinforcement regulation process began in 2012. This paper aims to examine whether, since 2012, the Bank of Spain's regulatory effort on impairment accounting standards has induced less income smoothing, correcting its countercyclical effect.Design/methodology/approachA regression model is applied during the period 2005–2020, to test whether there is a trend change in the correlation between the level of provisions and annual earnings in 2012.FindingsThe results show that from 2012 onwards (when the Bank of Spain reinforced the regulation on provisioning), there was a correction in income smoothing behaviour.Originality/valueThis study provides empirical evidence that reinforces the claim that accounting policy can affect decision-making accounting practices, in this particular case, at the Bank of Spain.

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Section: Discussionmentioning

confidence: 99%

Section: Theoretical Background 21 Impairment Model Under Ifrs Perspe...mentioning

confidence: 99%

Section: Theoretical Backgroundmentioning

confidence: 99%

See 1 more Smart Citation

Income smoothing management and loan loss provisions in the banking system

Gómez-Ortega,

Licerán-Gutiérrez,

Horno-Bueno

2023

JRF

View full text Add to dashboard Cite

show abstract

“…Finally, Pastiranová and Witzany (2021) empirically analyzed the behavior of expected LLP during the economic cycle, concluding that IFRS 9 suffers from pro‐cyclicality because ECL is sensitive to the choice of models applied by banks or to the assumptions applied to forward‐looking information used in the models.…”

Section: Research Background Literature Review and Hypothesis Develop...mentioning

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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“…In this respect, and because of this possible “cliff effect”, some supervisors and regulators have expressed their views (European Central Bank, 2020; European Securities and Markets Authority, 2020; IASB, 2020). Pastiranová and Witzany (2021) recommend issuing regulatory guidance documents that mitigate it.…”

Section: Conclusion and Future Research Linesmentioning

confidence: 99%

Impact of the application of IFRS 9 on listed Spanish credit institutions: implications from the regulatory, supervisory and auditing point of view

Gómez-Ortega

Gelashvili

Jalón

et al. 2022

JRF

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PurposeAt the European level, on January 1st 2018, the accounting standard IFRS 9, on the principles for the accounting information of financial instruments entered into force. The objective of this research paper is to analyse the impact of the first application of IFRS 9 on the credit institutions listed in Spain, specifically, its effects on their financial statements and the corresponding audit reports.Design/methodology/approachIn order to achieve research purpose, a descriptive analysis of the analysed entities has been carried out, through the financial and economic indicators, and through the review of the corresponding audit reports.FindingsThe results show that the application of IFRS 9 had a significant effect (both positive and negative) on the results of the subject companies. Based on the audit reports, the application of this new standard increased the degree of complexity and that of accounting estimates in the financial statements.Originality/valueThis research is an important contribution to the literature on this topic because it analyses the impact of IFRS 9 under the main points of view that allow for a more complete understanding of the standard thus addressing the regulatory accounting standpoint, the economic–financial impact and the consequences on the implementation process.

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IFRS 9 and its behavior in the cycle: The evidence on EU countries

Cited by 10 publications

References 26 publications

Income smoothing management and loan loss provisions in the banking system

Income smoothing management and loan loss provisions in the banking system

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

Impact of the application of IFRS 9 on listed Spanish credit institutions: implications from the regulatory, supervisory and auditing point of view

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