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

Abstract

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.

Income smoothing management and loan loss provisions in the banking system

“…Finally, it is worth noting that during the study, we observed that larger entities in 2020 significantly increased their coverage and impairment allowance due to the forecasts of the COVID-19 pandemic, which could trigger an accelerating effect in the economic crisis. In this regard, different entities, supervisors and regulators have issued communications so that the interpretation and application of the accounting standard and the model for estimating impairment are cautious, and attempts are made to avoid what is known as the "cliff" effect (European Central Bank, 2020;European Securities and Markets Authority, 2020;G omez-Ortega et al, 2022;IASB, 2020). Pastiranov a and Witzany (2022) recommend issuing regulatory guidance documents that mitigate the procyclical behaviour of IFRS 9 models.…”