IFRS 9 is an accounting standard for financial instruments which will replace IAS 39. It will enter into force on January the first of 2018, however, an earlier implementation is possible.
The IFRS 9 standard contains ruffle of three components, i) an improved and more logical model for classification and measurement, ii) a forward-looking provision model based on expected losses and, iii) a sharp change in methodology for hedge accounting.
The standard is arguably the biggest challenge in the area of credit risk modeling since Basel II, and also means that more companies than ever are forced to model their risks. Even banks with sophisticated credit risk models used today for calculating the capital is facing tough changes. All companies will have to make major efforts concerning, among other, data, IT, processes, management, reporting, modeling, validation and auditing. Companies will, at each reporting date, be required to have an idea of where they are in the business cycle and what that will mean in terms of expected loss for each transaction.
The companies have to different extent conducted feasibility studies and in many instances chosen to work with a third-party software to facilitate the work. However, its an extensive work that affects many parts of the business. By getting a clear overview and guidance within the existing rules and requirements, measures can be taken and moreover the operation can be developed.
FCG provides, among others, the following services:
Selection of third-party provider