Project information
Expected credit losses and cyclicality of provisions under IFRS 9

IFRS 9 was introduced to replace International Accounting Standards (IAS 39). The new approach to credit loss provisioning differs significantly from the one under IAS 39 – under IAS 39, credit loss provisions were driven by incurred losses, while IFRS 9 employs a different, forward-looking approach.
One of the key aspects of the debate surrounding IFRS 9 is whether the new approach to credit loss provisions helps mitigate the inherent pro-cyclicality seen with IAS 39. Pro-cyclicality would be an undesirable property of the new regulation, as the procyclical tendencies could accelerate and deepen the next economic recession, and have a profound effect on the stability of the whole financial system. Therefore, the project aims to contribute to this debate by examining the pro-cyclicality of the provisioning under IFRS 9.