Toward a Framework for Examining the Implementation of IFRS 9 in Banking Industry: An Assessment from Lebanon

Abstract

The ill-timed recognition of Credit Losses had proven to have a remarkable negative impact not only on the financial position of the banks, but also it affected the banks’ going concern and sustainability. This has been evidenced by the most recent Global Financial Crisis (GFC) in 2007, whereby banks and other financial institutions have been obliged to implement the IFRS 9 accounting standard (International Financial Reporting Standard 9). The financial instrument IFRS 9 requires firms to model future events in the macroeconomic environment and calculate Expected Credit Loss (ECL) for their financial instruments over either a 12 month or lifetime period. The implementation of this newly developed and implemented accounting principle will help in reducing the likelihood of a repetition of another financial crisis based on similar causes since it allows investors to know detailed information about any projected credit losses. Financials need to know if this shifting in accounting principles will lead to eliminating or reducing financial crisis. This paper puts forward as assessment of the impact on Lebanese banks linked to the transition from IAS 39 to IFRS 9, aiming to figure out if this new instrument helped avoiding financial crisis in the banking sector. This is an exploratory, qualitative research using inductive approach. Data will be collected using a simple questionnaire distributed to a sample of Lebanese banks. The paper offers a review of the International Financial Reporting Standards including history, the goals behind the implementation of common standards, defining IFRS principles that are applied in banks, and assessing the top concerns in applying IFRS 9 in banks with emphasis on Lebanon. The research`s outcome will propose a framework of recom-mendations to adopt the new accounting principle IFRS 9 in Banks in a way that will help in avoiding and eliminating the financial crisis.