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IASB seeks input on feasibility of expected loss model

25 June 2009

 

 

The International Accounting Standards Board (IASB) today published a Request for Information on the feasibility of an expected loss model for the impairment of financial assets. Impairment is one of the issues that the IASB is addressing in the second phase of its comprehensive review of IAS 39 Financial Instruments: Recognition and Measurement.

The Request published today seeks input on the practical issues that would arise, if an expected loss model was required. The input will assist the IASB in developing formal proposals that it plans to publish in an exposure draft in October 2009.

The current model in IAS 39 requires an entity to account for credit losses in financial assets only if an event (or a combination of events) has occurred that has a negative effect on future cash flows and that effect can be reliably estimated (this is known as the incurred loss model). A feature of that model is that an entity is not permitted to consider the effects of future expected losses. The financial crisis has highlighted this as an area of concern. Responding to the request of the G20 leaders and others the IASB is reviewing that approach and examining the expected loss model as an alternative.

The expected loss model requires an entity to make an ongoing assessment of expected credit losses, which may require earlier recognition of credit losses. This would better reflect the way that financial assets are priced and the way some companies manage their business.

The IASB welcomes responses to its Request for Information by 1 September 2009.

The Request for Information can be downloaded from the ‘Open for Comment’ section on www.iasb.org.

Subscribers may also view the document in the eIFRSs. Comments received will be posted on that website. The project team will introduce the Request for Information in a live web presentation in due course. Details will be announced on www.iasb.org.

Press enquiries

 

For press enquiries, please contact:

  • Mark Byatt, Director of Corporate Communications, IASB
    Telephone: +44 (0)20 7246 6472
    Email: mbyatt@iasb.org
  • Sonja Horn, Communications Adviser, IASB
    Telephone: +44 (0)20 7246 6463
    Email: shorn@iasb.org
Technical enquiries

 

For technical enquiries, please contact:

  • Martin Friedhoff, Project Manager, IASB
    Telephone: +44 (0)20 7246 6902
    Email: mfriedhoff@iasb.org
  • Sue Lloyd, Senior Technical Consultant, IASB
    Telephone: +44 (0)20 7246 6454
    Email: slloyd@iasb.org