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Financial Instruments (Replacement of IAS 39): Impairment - 2011 Supplementary Document


The IASB developed its proposals on impairment of financial instruments in its Exposure Draft issued in November 2009. The FASB developed different proposals in its Exposure Draft on financial instruments that it issued in May 2010. The comments received by the IASB on its November 2009 proposals highlighted support for the measurement principles, but also indicated significant operational difficulties in applying those principles, especially in the context of open portfolios. In its redeliberations, which started in July 2010, the IASB developed an approach for open portfolios on the basis of the advice received from the Expert Advisory Panel and outreach activities undertaken after the publication of the November 2009 proposals. While starting from different objectives in their respective projects, the FASB and the IASB started in October 2010 to jointly redeliberate the impairment model, with the common primary objective of reaching a converged solution for impairment of financial assets.

This work resulted in the joint publication of the Supplementary Document Financial Instruments: Impairment (SD) on 31 January 2011. The SD requested views on a converged model for the recognition of expected credit losses in the context of open portfolios only. The Boards were addressing this issue separately because it represented the area of greatest operational complexity in the proposals for amortised cost and impairment.

In February and March 2011 EFRAG undertook outreach activities on the IASB's supplementary document, in close cooperation with the IASB and FASB technical staff. EFRAG issued its comment letter on 8 April 2011. EFRAG supported a common operational impairment approach for all financial assets based on decoupling of interest income and expected credit losses. EFRAG disagreed with the floor and expressed concerns about the significant changes to the impairment model. Therefore, EFRAG suggested:

  • more field-testing;
  • a needed holistic approach to the IAS 39 replacement project;
  • earlier recognition of credit losses.

For further developments of the impairment model for financial assets, please refer to the following project: Impairment - ED 2013

For information on all phases of the development of IFRS 9, please refer to the following project: IFRS 9 - Financial Instruments

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