Challenges and economic consequences of IFRS 9: evidence from China

Savannah (Yuanyuan) Guo, Beilei Mei, Yanchao Rao and Jianfang Ye

Journal of Accounting Literature, 2023, vol. 47, issue 2, 298-324

Abstract: Purpose - This study investigates the implementation challenges and economic consequences of the International Financial Reporting Standards 9 (IFRS 9) Financial Instruments. Design/methodology/approach - Descriptive evidence on equity asset reclassifications and estimated impairment using the new expected credit loss (ECL) model are presented. Multivariate analyses on the disposal of available-for-sale (AFS) and fund investment post-announcement and the value relevance of impairments to financial assets post-implementation are performed. Findings - Over 60% of sample firms report inconsistent equity asset reclassifications and do not change estimated impairment using the new expected credit loss model. Firms also switch from AFS to equity fund investments post-announcement. Lastly, impairments to financial assets increase in value relevance to investors’ post-implementation, but only in financial institutions and firms with Big 4 auditors. Originality/value - This study's findings suggest that IFRS 9 presents implementation challenges and changes equity investment strategies. They also indicate cross-sectional differences in firms' ability to effectively apply the new standards. This study is valuable for policymakers, business leaders, investors and academics.

Keywords: IFRS 9; New CAS 22; Financial instruments; Classification; Expected credit loss (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jalpps:jal-06-2023-0109

DOI: 10.1108/JAL-06-2023-0109

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