Please use this identifier to cite or link to this item: https://www.um.edu.mt/library/oar/handle/123456789/99496
Title: IFRS 9 : the standard conveying complexity to understand
Authors: Micallef, Noel (2015)
Keywords: Financial Instruments
Accounting -- Standards
Financial institutions
Issue Date: 2015
Citation: Micallef, N. (2015). IFRS 9 : the standard conveying complexity to understand (Master's dissertation).
Abstract: Purpose: The main objective of this research is to examine whether the complexity of financial instruments in the current accounting standards is being effectively understandable as required by the IASB/FASB in the qualitative characteristics framework. Design: The thesis' aim was achieved through face-to-face or email semi-structured interviews with the interested parties, being seven local financial institutions, three non financial institutions and four audit/advisory firms (being the local banks' auditors and advisors). Findings: The study revealed that although companies and financial institutions are aware of the new standard on financial instruments, generally financial institutions are more aware and are likely to know the implications since they will be mostly affected. However, only one local credit financial institution is analysing in depth the impact of IFRS 9 on its balance sheet. On the other hand, one should note that private middle companies see this standard not relevant to them and therefore are not aware of the new standard. Effective communication is described as an important factor for corporate reporting as it enhances the confidence in the financial statements even though complexity is being experienced in corporate reporting. The complexities in the current standard (IAS39) that was mentioned match with those listed in the literature review and when they are trying to apply the standard, limitations on practical applications are encountered on a daily basis. It is seen that standards are in some circumstances adding complexity on how it is been presented to the general users. In this thesis, complexity was split into two: 'unavoidable complexity', which cannot be removed as a result of the complicated financial instruments and 'avoidable complexity', which can be avoided if the accounting standards were simpler. Volume, interpretation and implementation are amongst the avoidable complexities. The overall response was that the new standard will reduce the existing issues and some of the complexities as well as it is more principle-based. However, the indications are that IFRS 9 might be more judgemental than the standard being replaced. In fact some argued that the more judgements the more complex situation become and that judgement is a new complexity for the financial reporting. All financial institutions will face significant impact on their balance sheet as a result of the new impairment model. From a local perspective, foreign companies registered in Malta reporting in accordance with IFRSs will be affected since their tax refund will be deferred as a result of the expected credit losses. As a result of this and to the new complexities many are of the opinion that local companies might shift to local GAPSE. Conclusion: This study concludes that the new standard will reduce the tainting rules of the previous standard, however, a new complexity will emerge, namely that of more judgement which inevitable increase complexity. Therefore, the standard is not conveying the inherently complexity financial instruments to understandability since the mean of communication is still complex.
Description: M.A.
URI: https://www.um.edu.mt/library/oar/handle/123456789/99496
Appears in Collections:Foreign dissertations - FacEma

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