EXPECTED LOSS MODEL ON WAY
There needs to be a faster movement towards the use of expected losses rather than incurred losses, says the International Accounting Standards Board (IASB). ‘After the outbreak of the crisis, our current impairment model, which was based on incurred losses, was criticised for being too little, too late,’ IASB chairman Hans Hoogervorst said. ‘We think that this criticism was partially justified. The fact that the market capitalisation of many banks is far belov their book value is an indication that market participants do not believe that their current level of provisions reflect economic reality.’ The IASB and US Financial Accounting Standards Board ‘are well on our way to completing an expected loss model’, said Hoogervorst.
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