As of 1 January 2018, an updated standard will become effective under IFRS 9, replacing much of IAS 39 Financial Instruments: Recognition and Measurement.[1] Under the new standard, losses on debt-type instruments will need to be recognized earlier, while forward-looking information will need to be incorporated into the modelling of those losses. Under IFRS 9, for any loan carrying a provision amount, by definition, expected losses will be quantified at inception and will be updated periodically, whereas losses were accounted for as, and when, they occurred (‘backward-looking approach’) under previous accounting. The new standard aims to avoid procyclical lending and asset price bubbles that were deemed the primary cause of the 2007–2008 financial crisis and, simultaneously, it aims to give readers of financial statements a better appreciation of an entity’s credit-risk management processes.  

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