Stakeholders are calling for more time and a
revised integrated joint proposal following a joint consultation on
impairment losses by the International Accounting Standards Board
(IASB) and Financial Accounting Standards Board (FASB).
The joint supplementary exposure draft
proposed moving to an expected loss model to provide a more
forward-looking approach to how credit losses are accounted for to
better reflect the economics of lending decisions. The two standard
setters initially had separate proposals for loss recognition.
In its response, the Institute of Chartered
Accountants for England and Wales (ICAEW) said that convergence
arising from two different approaches is clearly desirable but not
if the price is a poor standard arising from too much
compromise.
“In order to achieve convergence we may in
this instance be willing to support an outcome that both boards
feel able to support, even if this would not necessarily be our
preferred solution, as long as the outcome was a high quality,
operational standard with clear underlying principles,” the ICAEW
said.
The Institute also said that the exposure
draft timing and length of the consultation period have made it
challenging for many constituents to review the proposals in the
desired level of depth.
The Association of Chartered Certified
Accountants (ACCA) said the draft has been developed principally to
address issues that banks had with the original proposals.
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By GlobalData“It will be generally applicable and it
introduces significant new concepts to be applied to open
portfolios without it being clear whether they will be applied to
other circumstances,” the ACCA warns.
In its response Crowe Horwath said that while
it supports the board’s objective to improve accounting for the
allowance for credit losses, it does not support the proposal.
“We believe there are many unanswered
questions in the proposal, including the proposed accounting for
transfers between the ‘good’and ‘bad’ books, the impairment model
for bad assets as well as purchased assets,” Crowe Horwath
said.
Big Four firms KPMG and Ernst & Young
called for more time and proper testing of the proposed model
“The final standard should only be published
after the proposed model has been properly field tasted by both
preparers and auditors and appropriate feedback has been obtained
on the final imperilment model,” Ernst & Young said.
Ernst & Young also expressed scepticism
over whether the 30 June 2011 project due date will be meet
“We suggest that the boards reach out to work
with the preparers to understand the impact of the proposals across
regions before the proposals are finalised,” KPMG said.
The IASB and FASB are reviewing consultation
comment letters.
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