It may be the case that your financial institution has to implement both IFRS 9 and CECL. Understanding the nuances of these two game-changing regimes is mission critical for financial institutions faced with implementing IFRS 9 for non-U.S. entities and CECL for U.S. entities. In this article we examine them together to illuminate the challenges and opportunities of traversing the intricate landscape of IFRS 9—CECL implementations across the enterprise.
Much ink has been spilled about the credit-risk analytics and credit-impairment methodologies required for IFRS 9 and/or CECL compliance. Moving from a passive annual credit-review regime to active credit reporting is a cultural sea-change for most organizations as they attempt to reconcile data across risk and finance/accounting business functions. Furthermore, reconciling the CFO’s assets/liabilities perspective with the CRO’s products/portfolios perspective demands sharing data across different cultures and views inside the bank. Many questions may arise, including:
- What challenges and opportunities does the organization face?
- Under what conditions can the financial institution reap the benefits of implementing both accounting regimes?
- What specific nuances must be examined?
- What specific challenges must be navigated?
- How does the organization minimize implementation costs and delays and maximize transparency and post-implementation flexibility?
Given this complexity, it is insightful to take a moment to examine the commonalities and the differences between IFRS 9 and CECL and the resulting business implications.