EBA欧洲银行-2009-01-15-28CEBS-comment-letter-ED-IFRS-7-Debt-instruments29_5页_110kb

CEBS Comments on Exposure Draft: Investments in Debt Instruments (Proposed Amendments to IFRS 7)

Core Content

The Committee of European Banking Supervisors (CEBS) has provided detailed comments on the Exposure Draft (ED) titled Investments in Debt Instruments (Proposed Amendments to IFRS 7). CEBS, composed of high-level representatives from banking supervisory authorities and central banks in the European Union, emphasizes the importance of sound and high-quality accounting standards and transparent, comparable financial statements to enhance market discipline and promote international financial stability.

Main Views and Key Information

1. Disclosures on Financial Instruments

CEBS highlights that disclosures about financial instruments are essential for users to make well-informed investment decisions. It advocates for decision-relevant and transparent information to strengthen market discipline mechanisms.

• Concerns about the ED's Additional Disclosures:
  • CEBS questions the added value of the proposed disclosures requiring entities to report profits or losses as though all investments in debt instruments (except those classified as at fair value through profit or loss) had been:
    • (i) classified as at fair value through profit or loss
    • (ii) accounted for at amortized cost
  • These disclosures are not directly related to the breakdown of available-for-sale (AFS) debt impairment, which is a key concern of CEBS and other stakeholders.
  • The requirement may confuse users and does not align with the goal of identifying components of impairment actually recorded on the balance sheet.

2. Proposed Amendment to Impairment Rules

CEBS urges the IASB to consider an amendment to IAS 39 to align the impairment treatment of available-for-sale debt instruments with those measured at amortized cost.

• Key Recommendation:
  • Impairment of AFS debt instruments should only reflect incurred credit losses, not the difference between the carrying amount and fair value.
  • CEBS believes that this approach would improve timely recognition of impairment and ensure consistency with debt instruments measured at amortized cost.

3. Disclosure Requirements for AFS Debt Instruments

CEBS calls for more detailed disclosures regarding the components of impairment for AFS debt instruments, specifically:

• The total impairment amount
• The credit and non-credit loss portions
• A breakdown by categories (e.g., available for sale, loans and receivables, held to maturity)

4. Scope of the Exposure Draft

CEBS questions the exclusion of debt instruments classified as at fair value through profit or loss (FVTPL) from the scope of the ED.

• Suggestion:
  • Consider including FVTPL and held for trading (HFT) instruments in the scope to improve transparency.
  • However, it acknowledges that current systems may not be capable of producing such disclosures.

5. Effective Date and Transition Requirements

• Agreement on Urgency:
  • CEBS agrees that the change should be implemented quickly, but careful consultation with preparers is needed to determine the earliest feasible effective date.
• Transition Requirements:
  • The transition requirements are considered appropriate based on the need for a timely and feasible implementation.

Summary of CEBS Recommendations

• Amend IAS 39 to ensure that impairment of AFS debt instruments reflects only incurred credit losses.
• Enhance disclosure requirements to include a breakdown of impairment components (credit vs. non-credit) and classification by categories.
• Include FVTPL and HFT instruments in the scope of the ED to improve transparency, if feasible.
• Ensure consistent terminology and disclosure formats between IASB and FASB.
• Provide detailed reconciliations between profit or loss and the alternative scenarios for impairment.
• Focus on timely impairment recognition to reflect the deterioration of credit quality in regulatory capital.

Appendix Highlights

The CEBS June 2008 Report outlines the practical differences in impairment treatment between AFS and amortized cost instruments, emphasizing the need for timely and accurate impairment recognition. It also calls for reversals of impairment losses for equity instruments and limiting debt impairment to credit components to align with prudential requirements.

Conclusion

CEBS believes that the proposed amendments to IFRS 7, particularly regarding disclosures and impairment treatment, do not fully address the concerns raised by stakeholders. It recommends more targeted and meaningful disclosures, alignment with prudential standards, and careful implementation planning to ensure effective and timely application of the new requirements.