Regulatory Alerts2016-12-22 | BSD/DIR/GEN/IFR/09/130Guidance Note to Banks and Discount Houses on the Implementation of IFRS 9 (Financial Instruments) in Nigeria
In this document, you will find the implementation roadmap and requirements for the adoption of International Financial Reporting Standard (IFRS) 9 by Nigerian banks. IFRS 9 is an international accounting standard that deals with financial instruments and replaces the previous standard, IAS 39. The Central Bank of Nigeria (CBN) has mandated all Nigerian banks to adopt IFRS 9 for their financial statement reporting from January 1, 2018. The document outlines various aspects that are required to be addressed by the banks while implementing IFRS 9, including: 1. Adoption of risk-sensitive approach and advanced internal rating-based (AIRB) approaches for measuring credit impairment; 2. Establishing appropriate governance structures, processes, and systems to implement IFRS 9 effectively; 3. Enhancing data quality and developing the necessary analytics capabilities to support the new requirements; 4. Implementing a robust valuation framework that aligns with IFRS 9; 5. Developing recovery and resolution plans for financial instruments; 6. Adopting policies for recognition of credit impairment, classification and measurement of financial assets and liabilities under IFRS 9; 7. Submitting monthly updates on the implementation status to the CBN; 8. Providing detailed information for valuation of equity investments and policies for modification and renegotiation of financial assets. The document also requires banks to classify their financial assets and liabilities under IAS 39, IFRS 9, and Advanced Internal Rating-Based (AIRB) approaches. Additionally, the document provides a template for classification under IFRS 9. Banks are required to submit monthly project status reports to the CBN. The document uses various abbreviations and terms related to financial instruments, risk management, and accounting standards, such as EAD (Exposure at Default), ECL (Expected Credit Loss), FVOCI (Fair Value through Other Comprehensive Income), IASB (International Accounting Standards Board), IFRS 9 (Financial Instruments), ILAAP (Internal Liquidity Adequacy Assessment Process), LGD (Loss Given Default), and PD (Probability of Default).