IFRS9 for Financial Institutions–The Case for IFRS and FINREP Taxonomies–A Conceptual Gap Analysis

Manuscript Type: Theoretical
Main topic: A tsunami of regulations since the 2013 financial crisis is steering
toward’s Europe’s financial service sector. At the same time the accounting
standard for financial institutions’ core products the financial instruments
will be changing.
As disclosures according to IFRS 9 become mandatory by 2018, the existing
IFRS Taxonomy for IFRS 9 already developed by the IFRS Foundation,
represents a suitable and objective framework to assess IFRS 9 impact on
disclosures. The specific goal of this paper is to perform a conceptual gap
analysis considering the IFRS 9 taxonomy issued by the IASB and the Financial
Reporting (FinRep) taxonomy on IFRS 9 issued by the European Banking
Authority (EBA).
In general, the IFRS Taxonomy is not used very much in practice. This is not
understandable as several advantages relate to the IFRS taxonomy: as it is not
the objective of a principle-based accounting standard to define specific rules
for each and every disclosure, this is the reason why to derive reporting
elements would be very difficult to accomplish. The IASB started to perform
a review process of the XBRL Due Process in 2013. As a result the
development of the IFRS taxonomy should become part of the general due
process of the financial reporting standards. Due to these changes it is
expected that the importance of the IFRS taxonomy will be growing. The
FinRep-taxonomy has become mandatory since 2014 for all banks within
Europe, to fulfill the regulatory reporting requirements according to the
Capital Requirements Directive (CRR) IV.
Results: Even though the disclosures for external reporting and for
regulatory reporting are based on the same accounting framework
International Financial Reporting Standards Boards (IFRS), differences can be
observed with regard to disclosures, which are partly material. These
differences become transparent when analysing IFRS- and FinRep-taxonomy
reporting elements. This is caused by the principle-based IFRS, which enable
scope of interpretation and the different objectives of the IASB and the
banking supervision. Whereas the IASB follows the objective to develop
industry non-specific international financial reporting standards, the banking
supervision core focus lies on the banking industry. The EBA follows specific
information requests with the FinRep-taxonomy in the role as banking
supervisory. The IASB intends to provide decision useful information for
investors. Nevertheless these two taxonomies provide the possibility for a
starting point for the harmonization and the development of common
practice disclosures, which could counteract against heterogeneous financial
reporting and the issue of “information overload”.
Method: Analytical
Practical Implications: This paper is relevant for managers who are
responsible for external and regulatory reporting.