Frequently Asked Questions - International Financial Reporting Standards (IFRS)
The following are a selection of questions received from reporters concerning the use of IFRS-based data for statistical reporting. The answers presented here are intended for general guidance only so that reporters may need to contact us for more specific instructions in many cases. The contents of this page will be updated periodically.
International Financial Reporting Standards (IFRS):
If you require any further assistance on this subject contact
us.
Q: Our management information systems have recently been changed to a full IFRS based standard to meet financial reporting requirements. Can we use data sourced from this system to provide statistical data to the Bank?
A: In many cases yes. But there are some important exceptions where IFRS accounting would deliver information in a form inappropriate for inclusion within Monetary Statistics and the National Accounts. For example, Monetary Statistics require that loan and deposit instruments are always reported at their amortised cost, even where IFRS would permit or require fair valuation. It is therefore important that you contact us to discuss your proposals in more detail. Please do not change your basis for reporting before talking to us.
Q: Some of the IFRS-sourced data that we currently supply on your statistical forms does not fully meet the Yellow Folder definitions. As we are a very small reporter and the cost of adapting our systems to deliver data in the form you require would be high, can we continue to report on our current basis?
A: The Bank will consider each case on its merits. In most instances we will attempt to weigh the extent of divergence from statistical standards, the importance of the affected data to key users, the impact of your data on the aggregated statistic and the system development cost to you to deliver data to the required specification. If the data contribute to a series which is of lower priority to users and if your contribution to the aggregate is very small then we would normally expect to accept your current basis for reporting. If, on the other hand, your data diverge materially from the required standard and the aggregate statistic is of high importance to users then we may explore with you the scope for system development to deliver the required concept. However, while we can often be very flexible, there are some issues, for example the valuation of loans (see previous answer), where we seek to uphold the statistical standard across all reporters, large and small.
Q: Under IFRS securitised assets currently held off balance sheet by securitisation vehicle companies will revert to the balance sheet of the originator if the latter retains an interest. Should reporters continue to exclude from Form BT assets securitised through a vehicle company established for this purpose?
A: Under current statistical standards, any assets which have been securitised (or are in the process of securitisation through a vehicle company established for the purpose) should be excluded from Form BT and similar statistical balance sheet returns provided the following conditions apply:
i) That the vehicle company can engage in financial intermediation, for example if it has the right and authority to issue securities, backed by the aforementioned assets, that may be bought by third parties either on issuance or subsequently; and
ii) that a separate full set of accounts for the vehicle company can be made available.
However, the statistical treatment of such vehicle companies is now under review. The Bank and the BBA are currently exploring alternative reporting models with industry representatives. Their aim is to develop guidance which is analytically meaningful to users and practical for reporters. If you have any questions or views on this issue please contact Stephen Burgess (020 7601 5356).
For the issuance of covered bonds, the statistical treatment will depend on the structure of the individual reporting institution. If you are considering bringing back securitised assets onto the balance sheet of the originating institution (whether these assets are reverting from a vehicle company or from a covered bond entity), please contact Stephen Burgess (020 7601 5356) for reporting guidance.
Q: Reporters may have deposits which were deemed dormant (taken to profit) which will have to be restated as deposits under IFRS. How should this process be captured on form BT and associated statistical balance sheet forms?
A: The dormant accounts will need to be reported on the BT, BE and AD, in the same way as all other deposit accounts. The Bank will need to be informed of the amounts involved and their sectorisation preferably before the amounts are added to the balance sheet, but, at the latest, as the form BT is submitted.
Q: IFRS implementation brings pension accounting in to the profit and loss account, and on to the balance sheet. Where should the expenditure and liability (or asset) for pension obligations recognised under IFRS be reported?
A: For balance sheet data, the liability (or asset) should be reported on the form BT in item 19CD5 - "Reserves and other internal accounts". For income and expenditure - Form PL reporting - the accrued pension payments recognised under IFRS for the quarter/year as Current service cost, Past service cost, Losses on curtailment and Net actuarial losses recognised during the year should be included in item PL12AB, "operating expenses – pension contributions". The other aspects of the P&L charge, i.e. Interest cost and Expected return on plan assets should be reported in item PL14, "other items". (Please also see Statistical Notice 2005/02).
Q: We have been reporting interest flows on Forms PL and ER on a contractual basis but now wish to move our reporting to the IFRS effective yield measure. What should we do?
A: Most reporters initially expected to adopt the IFRS effective yield interest measure for financial reporting through macro adjustments at the portfolio level and, as a consequence, were unable to provide the required sectoral/geographical detail for statistical reporting of interest on the IFRS measurement basis. This led the Bank to retain the contractual measure as the basis for statistical reporting, pending the full adoption of the effective yield measure within reporters’ management information systems.
For Form PL reporting, the Bank has allowed individual reporters to move to an effective yield reporting basis, subject to documenting the materiality of the change. Where this change involves the capitalisation and amortisation of receipts/payments previously recorded as fees, the change to the reporting of interest should be reflected in the reported data for fees on Form PL and to balance sheet outstanding on other forms.
For Form ER the position is different. To make full use of the effective interest rate data, the basis of measurement needs to be the same for all reporters. The Bank cannot accept a mixed basis for reporting and therefore requires that reporters continue to report using the contractual basis until such time as all reporters are able to move to the effective yield measure
.
Q: Where derivatives are designated as mortgage hedges under IFRS, in the statutory Balance Sheet both the derivatives and mortgages will be held at fair value with the impact on the Profit and Loss dependent on the extent of hedge ineffectiveness. How should these be reported on forms BT and PL?
A: On form BT, the mortgage portfolio should continue to be reported at amortised cost. The change in the fair value of the portfolio should be reported in box 19cb (All other revaluations) with the fair value of the hedging derivative reported in box 19b (Net liabilities under financial derivatives). Because these revaluations are also taken straight through to P&L, they should also both be reported in 19cd (Capital and other internal accounts).
On form PL both the change in fair value of the underlying mortgage portfolio and the hedging derivative should be reported in box 8C (Dealing profits, of which: derivatives).
Q: Under IFRS, institutions include a value for holdings of intangible assets (in house software developments, brandnames, customer lists, licenses etc.) on their balance sheets. Should this be reported on Form BT, and if so where?
A: As stated under point 5. in Statistical Notice 2005/01,
"Item 35B on the Form BT (fixed assets, commodities owned etc) should also record banks' holdings of intangible assets. The following clarification has
been made to the definitions:
'These consist of land, premises, equipment, vehicles, commodities (including silver), intangible assets and other assets owned or recorded as such by the reporting institution'."
