IFRS for Banks

The workshop is intended both for managers and staff participating in the process of accounting and financial reporting in banks and for employees of other departments of banks participating in processing or analysing accounting information, including Risk Management, Treasury, ALM and IT.

Objectives

• Obtain a thorough understanding of what financial assets and financial liabilities are, and how they are presented in a bank’s balance sheet and income statement
• Discover why different models are used for presenting financial instruments, including FVPL, FVOCI and Amortised Cost
• Find out about key IFRS standards important for bank accounting, including IFRS 9, IAS 32, IFRS 7 and IFRS 13
• Realise how banks categorise their financial assets under IFRS 9 business model and SPPI criteria and understand the differences between FVPL, FVOCI and Amortised Cost accounting
• Learn how banks calculate interest income and interest expense using effective interest rate method and understand what fair valuation is all about
• Understand the key requirements related to measurement of expected credit losses
• Find out how modifications of contractual arrangements with customers are accounted for and what are POCI assets

Benefits

Interactive methodology: the training course will be conducted in the form of an interactive workshop, where all relevant issues will be discussed with the active participation of participants, and the trainer will answer participants’ questions.

Practical approach: the topics discussed during the training course will be presented based on the trainer’s practical experience and illustrated with examples from banks’ financial statements. Quantitative examples will be solved using Excel spreadsheets.

Introduction: a look into a bank’s financial statements

• What are the main components of a typical bank’s balance sheet and income statement? What types of banking products and banking operations are they attributable to?
• What are financial assets, financial liabilities, and where do they appear in the balance sheet and income statement.
• Review of key IFRS standards that provide guidance for accounting for banking products and operations, including:
  • IFRS 9 Financial Instruments
  • IFRS 13 Fair Value
  • IFRS 7 Financial Instruments – Disclosures
  • IAS 32 Financial Instruments – Presentation

Valuation and presentation of financial assets and financial liabilities

• Book value and market value of the bank’s assets and liabilities – why are they different?
• Classification and measurement of financial assets in accordance with IFRS 9, including debt, equity and derivative instruments.
• Why are some financial assets and financial liabilities presented at fair value while others are presented at amortised cost?
• What are the implications of classification to the recognition of gains and losses?
• Key requirements related to “business model criterion” and “SPPI test” and their consequences to accounting treatment of financial assets.
• Measurement of financial assets and financial liabilities at amortised cost and construction of the “effective interest rate”.
• What are the consequences of classifying a financial asset to each of the categories: fair value through profit or loss, fair value through OCI and amortised cost.

Expected credit losses

• What are expected credit losses, and how are they calculated under the general “three stage” approach?
• What are the differences and similarities between the IFRS 9 impairment model and the Basel credit risk requirements?
• When are 12-month and when life-time expected losses required?
• IFRS 9 minimum requirements related to expected credit losses calculation and possible simplifications and “practical expedients”.

Introduction to hedge accounting

• What is hedge accounting and how can it help eliminate “accounting mismatches” in banks, resulting from application of derivatives to management of balance sheet structure.
• Examples of typical economic hedging relationships in banks where hedge accounting could be applied.

Disclosure requirements related to financial instruments

• Review of the requirements of IFRS 7 regarding financial instruments and financial risks.
• Examples of qualitative and quantitative disclosures – good and bad practices from available financial statements.

Participants of this one-day workshop will receive 7 CPD (Continuous Professional Development) credit hours.

Our courses fulfil the requirements of the professional development schemes of international professional bodies such as ACCA, IIA, PMI®, etc.