advertisement

What Is IFRS 9 And Why Is It Mentioned In The Latest Monetary Policy

advertisement
Ecobank

Tacked in between the surprising but not so surprising revelation that bond notes and all of Zimbabwe’s pseudo currencies were no longer equal to the USD, was a cryptic reference to something called IFRS 9. If you were one of the people stumped by this, fear not, I am here to educate you.

advertisement

What is IFRS 9?

Is fully known as International Financial Reporting Standard (IFRS) 9 and was introduced to the world by the International Accounting Standards Board (IASB) back in 2009 as a replacement for an earlier standard known as International Accounting Standard number 39.

You see when it comes to accounting there are two types of accounting:

advertisement
  1. Financial Accounting- which often involves creating what are known as financial statements. These statements are meant for consumption by the outside world. You see them in a lot of newspapers etc. To make it easier to compare these statements they have to be prepared in a uniform universally accepted way. Accounting standards such as IFRS 9 are applied to make sure that accounting information from various organisations is prepared in a consistent and acceptable way.
  2. Management Accounting-where financial information is recorded, compiled and presented to the management of the organisation in question in order to aid decision making. Here management comes up with whatever templates they deem useful.

The IASB has promulgated lots of standards meant to deal with all manner of issues a financial accountant might have to deal with. For example, there is IAS 1 which outlines the format/structure of Income Statements and other financial statements, there is IAS 2 which deals with inventories and IAS 29 dictates how entities in hyperinflationary economies are supposed to factor in inflation in their financial statements.

IFRS 9 is particularly important to banks. It deals with Financial Instruments. It defines what a Financial Instrument is, how to calculate its value and how it is to be recorded in the accounting books and financial statements. Banks tend to have a significant amount of financial instruments on their balance sheet.

IFRS 9 introduces prudence and consistency in the way in which financial instruments are recognised, recorded and presented. A lot of financial institutions have been known to inflate the value of their assets. IFRS 9 is meant to prevent that.

Why is IFRS 9 mentioned in the Monetary Policy

IFRS 9 came into effect last year in January 2018. As has already been made clear above, all businesses are required to adopt IFRS 9 when doing Financial Accounting. Banks like all the others adopted IFRS 9 last year. What the RBZ is stating is that they are pleased with the way IFRS 9 has enhanced the reporting environment.


Quick NetOne, Telecel, Africom, Econet Airtime Recharge


WhatsApp Discussions

Click to join a Techzim WhatsApp group:
https://chat.whatsapp.com/BiKUpt5hXMxHYedlfoSHul

If you find the group full, please notify us on +263 715 071 199 and we'll update the link.


3 thoughts on “What Is IFRS 9 And Why Is It Mentioned In The Latest Monetary Policy

  1. Your lecture missed out the important aspects. Or perhaps, that was intentional. IFRS 9 basically deals with credit losses.. The idea is to show that for any debt, or loan or receivable whose payment liability does not lie with the bank has their credit quality recognized and provided for before any loss happens. In essence, for that loan you have; the bank has to estimate how likely you are to default, how much they would lose should default, and recognise that amount as a loss already. This is to prevent the Global 2008 recession from happening again.

  2. Good one ZM. Further, the expected credit (ECL) losses should be classified according to Stage 1, 2 or 3 driven by deterioration in counterparty credit quality.

Comments are closed.

%d bloggers like this: