International GAAP Bank Limited Illustrative disclosures ...

International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9

February 2019

International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9

Foreword

The introduction of IFRS 9 Financial Instruments has attracted a huge amount of interest, speculation and debate from investors, regulators and other users of financial statements. Consistent themes have emerged from information published by banks since the standard was first applied last year in interim financial reports. Provision for loss allowances have gone up and are more sensitive to change in the future economic outlook than we have been used to in the past. Measurement in the year of transition has been complex and will continue to be so in the future as market practice evolves and provision methodologies are enhanced. As loss allowances are based on a bank's expectation of future economic scenarios and how these might drive losses in their loan books, this directly drives financial performance and balance sheet strength. Understandably we are seeing much more attention than ever before being paid to the words, not just the numbers. Often when large changes are made to accounting standards, the implementation of disclosures comes second to the recognition and measurement. It is clear that expectations of the relative importance of disclosure is different this time. Given provisioning is more forward-looking and so is more judgmental, expectations of users have increased. Users are demanding a greater knowledge of what underpins the expected credit loss allowance. Compliance with IFRS 7 Financial Instruments: Disclosures is the minimum, many banks are choosing to say more. With one year down, and many more to go, the application of IFRS 9 has just started. Undoubtedly demands for what banks should disclose will change over time, largely in response to the economic environment, regulatory expectations and observations of good practice. Observations we have gathered from financial statements we have seen in 2018 have been reflected in this new edition. I hope this publication helps you in setting your standard for implementing the disclosure requirements if you are a bank; or helps you consider what good may look like if you are an investor, auditor, or regulator. All feedback will be warmly received.

Andrew Spooner Global IFRS Lead for Financial Instruments February 2019

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International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9

Key contacts

Global IFRS Leader Veronica Poole ifrsglobalofficeuk@deloitte.co.uk

Global IFRS Lead for Financial Instruments Andrew Spooner ifrsglobalofficeuk@deloitte.co.uk

IFRS centres of excellence

Americas Argentina Canada LATCO United States

Fernando Lattuca Karen Higgins Miguel Millan Robert Uhl

arifrscoe@ ifrs@deloitte.ca ifrsLATCO@ iasplus-us@

AsiaPacific Australia China Japan Singapore

EuropeAfrica Belgium Denmark France Germany Italy Luxembourg Netherlands Russia South Africa Spain Switzerland United Kingdom

Anna Crawford Stephen Taylor Shinya Iwasaki James Xu

Thomas Carlier Jan Peter Larsen Laurence Rivat Jens Berger Massimiliano Semprini Eddy Termaten Ralph Ter Hoeven Maria Proshina Nita Ranchod Cleber Custodio Nadine Kusche Elizabeth Chrispin

ifrs@.au ifrs@.cn ifrs@tohmatsu.co.jp ifrssg@

ifrsbelgium@ ifrs@deloitte.dk ifrs@deloitte.fr ifrs@deloitte.de ifrs-it@deloitte.it ifrs@deloitte.lu ifrs@deloitte.nl ifrs@deloitte.ru ifrs@deloitte.co.za ifrs@deloitte.es ifrsdesk@deloitte.ch deloitteifrs@deloitte.co.uk

Acknowledgments We would like to extend our thanks to Evi Chatzitsakou and the IFRS centres of excellence in France, Germany, United States, Canada and the United Kingdom for their review.

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International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9

Deloitte's IAS Plus () is one of the most comprehensive sources of global financial reporting news on the Web. It is a central repository for information about International Financial Reporting Standards (IFRSs) as well as the activities of the International Accounting Standards Board (IASB). The site, which is also available in German, includes portals tailored to the United Kingdom and the United States, each with a focus on local GAAP and jurisdiction-specific corporate reporting requirements. Canadian portals in English and French were added in 2015. They feature news and publications related to all Canadian financial reporting frameworks, including IFRS. IAS Plus features: ?? news about global financial reporting developments, presented intuitively with related news, publications, events and more; ?? summaries of all standards, interpretations and projects, with complete histories of developments and standard-setter discussions

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International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9

Introduction

This publication includes illustrative financial instruments disclosures for banks applying IFRS 9. It is not a full set of financial statements. The illustrative disclosures outlined in this publication are in accordance with IFRSs, disclosures required by regulatory bodies have not been included. The relevant IFRS disclosure requirements are also included. Local regulatory requirements may limit the application of certain accounting policy choices or disclosures presented in this publication and preparers should tailor the disclosures they provide to their specific circumstances. The illustrative disclosures are prepared assuming International GAAP Bank Limited (`the Group') already applies IFRS 9 and therefore the transitional disclosures are not included. It is assumed that IFRS 16 is not applied at the periods covered by the illustrative financial statements. This publication does not include consolidated statement of cash flows, because IFRS 9 did not introduce any changes to the statement of cash flows. This publication includes the following: ?? a consolidated statement of profit or loss for the year ended 31 December 20XX; ?? a consolidated statement of comprehensive income for the year ended 31 December 20XX; ?? a consolidated statement of financial position for the year ended 31 December 20XX; ?? a consolidated statement of changes in equity for the year ended 31 December 20XX; ?? IFRS 7 disclosures in the notes of the financial statements as amended by IFRS 9; and ?? comparative information in respect of the preceding period, i.e. the year ended 31 December 20YY. To enhance understanding of the financial instruments specific disclosures some disclosures required by IAS 1 are also included, such as the disclosure of significant accounting policies and critical judgements and estimates. The entity only accounts for International GAAP Bank Limited have not been included as this publication aims to illustrate how the financial instruments disclosures of a banking group are affected by IFRS 9.

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International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9

Contents

Glossary

6

Consolidated statement of profit or loss

8

Consolidated statement of comprehensive income

14

Consolidated statement of financial position

18

Consolidated statement of changes in equity

22

Notes to the consolidated financial statements

24

[The following list of notes in this publication is included for ease of reference]

? Note 1 Significant accounting policies

25

? Note 2 Critical accounting judgements and key sources of estimation uncertainty

61

? Note 3 Credit risk

65

? Note 4 Liquidity risk

147

? Note 5 Market risk

159

? Note 6 Capital risk

185

? Note 7 Fair value of financial assets and liabilities

189

? Note 8 Net interest income

219

? Note 9 Net fee and commission income

221

? Note 10 Net trading income

221

? Note 11 Net income from financial instruments designated at FVTPL

223

? Note 12 Other revenue, other income and other expenses

223

? Note 13 Net gain/(loss) from derecognition of financial assets measured at amortised cost

225

? Note 14 Cash and cash equivalents

225

? Note 15 Trading assets

227

? Note 16 Derivative financial instruments

229

? Note 17 Loans and advances to banks

257

? Note 18 Loans and advances to customers

259

? Note 19 Investment securities

259

? Note 20 Trading liabilities

263

? Note 21 Deposits from banks

263

? Note 22 Deposits from customers

265

? Note 23 Debt securities in issue

265

? Note 24 Subordinated liabilities

267

? Note 25 Share capital

269

? Note 26 Share premium

269

? Note 27 Retained earnings

269

? Note 28 Other reserves

271

? Note 29 Transfers of financial assets

279

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International GAAP Bank Limited Illustrative disclosures under IFRS 7 as amended by IFRS 9

Glossary of abbreviations

ALCO Basel III Bps CCP CDS CET1 CVA DVA EAD ECL EIR FVA FVTOCI FVTPL G7

GDP IAS 1 IFRS IFRS 3 IFRS 7 IFRS 9 IFRS 13 ISDA LGD LTV NCI OCI OTC PD POCI S&P SPPI VaR

Asset and Liability Management Committee Basel III: International regulatory framework for banks Basis points Central Counterparty Clearing House Credit default swap Common Equity Tier 1 Credit valuation adjustment Debit valuation adjustment Exposure at default Expected credit loss Effective interest rate Funding valuation adjustment Fair value through other comprehensive income Fair value through profit or loss The Group of Seven ? an informal bloc of industrialized democracies ? Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States Gross domestic product IAS 1 Presentation of Financial Statements International Financial Reporting Standards IFRS 3 Business Combinations IFRS 7 Financial Instruments: Disclosures IFRS 9 Financial Instruments IFRS 13 Fair Value Measurement International Swaps and Derivatives Association Loss given default Loan-to-value Non-controlling interests Other comprehensive income Over the counter Probability of default Purchased or originated credit-impaired Standard & Poor's Solely payments of principal and interest on the principal amount outstanding Value at risk

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