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IFRS 9 Financial Instruments - Wiley Insight IFRS

Our purpose, across the PwC global network of firms, is to build trust in society and solve important problems. The Manual of Accounting - IFRS is our collected insights on the application of International Financial Reporting Standards (IFRS), the financial reporting language of the global capital markets.

IFRS 9 Financial Instruments - Wiley Insight IFRS

The lecture introduces the IFRS standards used to account for financial instruments and discusses their informational impact on capital markets. After an introduction that will touch on the institutional background of the international harmonization process in financial reporting, we will focus on key accounting issues related to financial instruments. We will illustrate the effects using current accounting practices of multinational entities, go into major research findings and apply the knowledge to case studies from accounting practice. We will conclude the lecture by an assessment of the importance of accounting for corporate governance and controlling (inside perspective) and for capital-market-oriented financial statement analysis (outside perspective).

The bi-weekly lectures combine theoretical concepts and practical insights on IFRS application. We will discuss the content and the implications of relevant IFRS regulations related to financial instruments. Frequent examples, exercises and cases will further deepen the understanding of issues in the practical implementation of IFRS reports. In addition, these exercises intend to specifically prepare students for exam questions.

Review focusing on the audit of Expected Credit Losses (ECL) for larger banks. It discusses classification and measurement of financial instruments, ECL modelling, measuring significant increase in credit risk, multiple economic scenarios, post model adjustments, data inputs, individually assessed exposures, and IFRS 9 disclosures.

The first-time adoption of IAS/IFRS accompanied by the issuance of new international accounting standards has provided mixed results regarding their ability to improve accounting quality. A possible reason is that not only the quality of the standard-setting process, but also other factors might affect accounting quality and one of its dimensions, namely, value relevance. By analysing data from a sample of 316 financial entities listed in 43 countries from all over the world and adopting IFRS 9 in place of IAS 39 as of 1st January 2018, this paper tests whether the quality of firm-level corporate governance and country-level investor protection environments affects the value relevance of equity values calculated according to the requirements of IFRS 9 and IAS 39. The results suggest that, despite both accounting standards providing investors with value relevant information, in the presence of high-quality corporate governance or a high-quality investor protection environment, IFRS 9 is more value relevant than IAS 39, whereas the opposite is true in the presence of low-quality corporate governance or a low-quality investor protection environment. The research results provide the first empirical evidence of the value relevance of the new accounting standard on financial instruments and contribute to the debate on the existence of other factors that, together with the quality of the IASB standards, affect the quality of financial reporting.

The objective of this paper is to investigate whether the quality of both corporate governance and the investor protection environment affect the value relevance of international financial reporting standard (IFRS) 9 and international accounting standards (IAS) 39. The first-time adoption (FTA) of the former at the beginning of 2018 in place of the latter provides the opportunity to test the ability of firm-level and country-level factors to improve value relevance, thanks to the availability of accounting amounts calculated according to the requirements of both accounting standards on financial instruments.

The regression parameters of such models have been estimated by using ordinary least squares (OLS) at the beginning of the transition year (2018) for entities that have not elected to restate comparative periods, but that have recorded the transitional effects in the opened retained earnings. The focus on accounting amounts estimated at the beginning of the transition year allows the assessment and comparison of the value relevance of equity book value calculated according to the requirements of different accounting standards on financial instruments. Indeed, while earnings at the beginning of fiscal-year 2018 are the same as those at the end of the prior period, different measures of book value are reported in the transition reports in which equity value calculated according to the requirement of IAS 39 is reconciled to that calculated according to the new IFRS 9 rules.

Table 4 provides evidence about the ability of firm-level corporate governance (Panel a) and of country-level investor protection (Panel b) to affect value relevance of book value calculated according to the requirements of different accounting standards on financial instruments. On running regression over the different clusters of firms and countries with different qualities of corporate governance and investor protection, results confirm the value relevance of all the different measures of book value. However, the preference of investors for such measures changes according to the quality of corporate governance and of the investor protection environment. 041b061a72

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