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

Abstract

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.