International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9

288 Pages·2017·2.94 MB·English

International GAAP Bank Limited
Illustrative disclosures under IFRS 7
as amended by IFRS 9
February 2019

International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9
Foreword
The introduction of IFRS 9 Financial Instruments has attracted a huge amount of interest, speculation and debate from investors,
regulators and other users of financial statements.
Consistent themes have emerged from information published by banks since the standard was first applied last year in interim financial
reports. Provision for loss allowances have gone up and are more sensitive to change in the future economic outlook than we have been
used to in the past. Measurement in the year of transition has been complex and will continue to be so in the future as market practice
evolves and provision methodologies are enhanced.
As loss allowances are based on a bank’s expectation of future economic scenarios and how these might drive losses in their loan books,
this directly drives financial performance and balance sheet strength. Understandably we are seeing much more attention than ever
before being paid to the words, not just the numbers.
Often when large changes are made to accounting standards, the implementation of disclosures comes second to the recognition
and measurement. It is clear that expectations of the relative importance of disclosure is different this time. Given provisioning is more
forward-looking and so is more judgmental, expectations of users have increased. Users are demanding a greater knowledge of what
underpins the expected credit loss allowance. Compliance with IFRS 7 Financial Instruments: Disclosures is the minimum, many banks are
choosing to say more.
With one year down, and many more to go, the application of IFRS 9 has just started. Undoubtedly demands for what banks should
disclose will change over time, largely in response to the economic environment, regulatory expectations and observations of good
practice. Observations we have gathered from financial statements we have seen in 2018 have been reflected in this new edition.
I hope this publication helps you in setting your standard for implementing the disclosure requirements if you are a bank; or helps you
consider what good may look like if you are an investor, auditor, or regulator. All feedback will be warmly received.
Andrew Spooner
Global IFRS Lead for Financial Instruments
February 2019
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International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9
Key contacts
Global IFRS Leader Global IFRS Lead for Financial Instruments
Veronica Poole Andrew Spooner
[email protected] [email protected]
IFRS centres of excellence
Americas
Argentina Fernando Lattuca [email protected]
Canada Karen Higgins [email protected]
LATCO Miguel Millan ifrs‑[email protected]
United States Robert Uhl iasplus‑[email protected]
Asia‑Pacific
Australia Anna Crawford [email protected]
China Stephen Taylor [email protected]
Japan Shinya Iwasaki [email protected]
Singapore James Xu ifrs‑[email protected]
Europe‑Africa
Belgium Thomas Carlier ifrs‑[email protected]
Denmark Jan Peter Larsen [email protected]
France Laurence Rivat [email protected]
Germany Jens Berger [email protected]
Italy Massimiliano Semprini ifrs‑[email protected]
Luxembourg Eddy Termaten [email protected]
Netherlands Ralph Ter Hoeven [email protected]
Russia Maria Proshina [email protected]
South Africa Nita Ranchod [email protected]
Spain Cleber Custodio [email protected]
Switzerland Nadine Kusche [email protected]
United Kingdom Elizabeth Chrispin [email protected]
Acknowledgments
We would like to extend our thanks to Evi Chatzitsakou and the IFRS centres of excellence in France, Germany, United States, Canada and
the United Kingdom for their review.
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International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9
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International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9
Introduction
This publication includes illustrative financial instruments disclosures for banks applying IFRS 9. It is not a full set of financial statements.
The illustrative disclosures outlined in this publication are in accordance with IFRSs, disclosures required by regulatory bodies have not
been included. The relevant IFRS disclosure requirements are also included. Local regulatory requirements may limit the application of
certain accounting policy choices or disclosures presented in this publication and preparers should tailor the disclosures they provide to
their specific circumstances.
The illustrative disclosures are prepared assuming International GAAP Bank Limited (‘the Group’) already applies IFRS 9 and therefore
the transitional disclosures are not included. It is assumed that IFRS 16 is not applied at the periods covered by the illustrative financial
statements. This publication does not include consolidated statement of cash flows, because IFRS 9 did not introduce any changes to the
statement of cash flows. This publication includes the following:
• a consolidated statement of profit or loss for the year ended 31 December 20XX;
• a consolidated statement of comprehensive income for the year ended 31 December 20XX;
• a consolidated statement of financial position for the year ended 31 December 20XX;
• a consolidated statement of changes in equity for the year ended 31 December 20XX;
• IFRS 7 disclosures in the notes of the financial statements as amended by IFRS 9; and
• comparative information in respect of the preceding period, i.e. the year ended 31 December 20YY.
To enhance understanding of the financial instruments specific disclosures some disclosures required by IAS 1 are also included, such as
the disclosure of significant accounting policies and critical judgements and estimates. The entity only accounts for International GAAP
Bank Limited have not been included as this publication aims to illustrate how the financial instruments disclosures of a banking group are
affected by IFRS 9.
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International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9
Contents
Glossary 6
Consolidated statement of profit or loss 8
Consolidated statement of comprehensive income 14
Consolidated statement of financial position 18
Consolidated statement of changes in equity 22
Notes to the consolidated financial statements 24
[The following list of notes in this publication is included for ease of reference]
– Note 1 Significant accounting policies 25
– Note 2 Critical accounting judgements and key sources of estimation uncertainty 61
– Note 3 Credit risk 65
– Note 4 Liquidity risk 147
– Note 5 Market risk 159
– Note 6 Capital risk 185
– Note 7 Fair value of financial assets and liabilities 189
– Note 8 Net interest income 219
– Note 9 Net fee and commission income 221
– Note 10 Net trading income 221
– Note 11 Net income from financial instruments designated at FVTPL 223
– Note 12 Other revenue, other income and other expenses 223
– Note 13 Net gain/(loss) from derecognition of financial assets measured at amortised cost 225
– Note 14 Cash and cash equivalents 225
– Note 15 Trading assets 227
– Note 16 Derivative financial instruments 229
– Note 17 Loans and advances to banks 257
– Note 18 Loans and advances to customers 259
– Note 19 Investment securities 259
– Note 20 Trading liabilities 263
– Note 21 Deposits from banks 263
– Note 22 Deposits from customers 265
– Note 23 Debt securities in issue 265
– Note 24 Subordinated liabilities 267
– Note 25 Share capital 269
– Note 26 Share premium 269
– Note 27 Retained earnings 269
– Note 28 Other reserves 271
– Note 29 Transfers of financial assets 279
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International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9
Glossary of abbreviations
ALCO Asset and Liability Management Committee
Basel III Basel III: International regulatory framework for banks
Bps Basis points
CCP Central Counterparty Clearing House
CDS Credit default swap
CET1 Common Equity Tier 1
CVA Credit valuation adjustment
DVA Debit valuation adjustment
EAD Exposure at default
ECL Expected credit loss
EIR Effective interest rate
FVA Funding valuation adjustment
FVTOCI Fair value through other comprehensive income
FVTPL Fair value through profit or loss
G7 The Group of Seven – an informal bloc of industrialized democracies – Canada, France, Germany, Italy,
Japan, the United Kingdom, and the United States
GDP Gross domestic product
IAS 1 IAS 1 Presentation of Financial Statements
IFRS International Financial Reporting Standards
IFRS 3 IFRS 3 Business Combinations
IFRS 7 IFRS 7 Financial Instruments: Disclosures
IFRS 9 IFRS 9 Financial Instruments
IFRS 13 IFRS 13 Fair Value Measurement
ISDA International Swaps and Derivatives Association
LGD Loss given default
LTV Loan-to-value
NCI Non-controlling interests
OCI Other comprehensive income
OTC Over the counter
PD Probability of default
POCI Purchased or originated credit-impaired
S&P Standard & Poor’s
SPPI Solely payments of principal and interest on the principal amount outstanding
VaR Value at risk
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International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9
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International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9
Consolidated statement of profit or loss
IAS 1:10A An entity may present a single statement of profit or loss and other comprehensive income, with profit or loss and other
comprehensive income presented in two sections. The sections should be presented together, with the profit or loss section
presented first followed directly by the other comprehensive income section. An entity may present the profit or loss section
in a separate income statement. If so, the separate income statement should immediately precede the statement presenting
comprehensive income, which begins with profit or loss.
When two statements are presented, the information required in IAS 1:82(a) – (ea) and IAS 1:81B(a) (see below) should be
presented in the separate income statement. Where the single statement is adopted, IAS 1:10A requires that the profit and
loss section is presented first followed directly by the statement of comprehensive income section. Where two statements are
presented, the income statement is presented immediately before the statement of comprehensive income. This publication
illustrates the practice of two statements.
References in this commentary to inclusion of items in the income statement should be read as referring to inclusion in the
statement of comprehensive income when the single statement approach is used.
IAS 1:81A The statement of profit or loss and other comprehensive income (statement of comprehensive income) should present,
in addition to the profit or loss and other comprehensive income sections:
1 (a) profit or loss;
2 (b) total other comprehensive income; and
3 (c) comprehensive income for the period, being the total of profit or loss and other comprehensive income.
If an entity presents a separate income statement, it does not present the profit or loss section in the statement presenting
comprehensive income.
IAS 1:81B The following items should also be disclosed in the income statement and statement of comprehensive income as
allocations for the period:
(a) profit or loss attributable to:
4 • non-controlling interests; and
5 • owners of the parent.
(b) comprehensive income for the period attributable to:
6 • non-controlling interests; and
7 • owners of the parent.
If an entity presents profit or loss in a separate statement it presents (a) in that statement.
IAS 1:82 The profit or loss section or the income statement should include line items that present the following for the period:
8 (a) revenue, presenting separately interest revenue calculated using the effective interest method;
9 (aa) gains and losses arising from the derecognition of financial assets measured at amortised cost;
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