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UAE regulators urge use of IFRS9 to counter effects of Coronavirus

Chris Hamblin, Editor, London, 6 April 2020

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The Central Bank of the United Arab Emirates, the Financial Services Regulatory Authority of Abu Dhabi Global Market and the Dubai Financial Services Authority, which polices the Dubai International Financial Centre, have released guidelines regarding the application of an important reporting standard in the era of the virus.

The standard in question is International Financial Reporting Standard 9 and the authorities have released a joint pronouncement on it to deal with the effect of the Coronavirus on firms' viability.

The know that firms are likely to have clients who are under financial stress because of the outbreak. The central bank has already given banks and finance houses some relief through the Government's Targeted Economic Support Scheme (TESS) and began to do so on 15 March. The authorities are supporting both federal and state initiatives to give sustainable support to borrowers who benefit from government-sponsored debt relief.

In addition to these measures these bodies believe that firms should take advantage of the flexibility that IFRS 9 gives them, as long as they are part of the aforementioned support scheme.  To help these banks and finance companies, the regulators will soon publish guidelines to do with the calculation of expected credit loss (ECL) provisioning in accordance with IFRS 9.

These guidelines will apply to banks and finance as they grapple with economic uncertainty. They will help them remain compliant with IFRS 9 and will promote a consistency of approach. Their overriding objective to ensure that financial reports are based on up-to-date estimations of the risks that financial companies face, while acknowledging that firms will have to make decisions about the application of IFRS 9 in a different way from heretofore. If the guidelines are unclear, the authorities want firms to reach out to them.

* Emma Erskine-Fox can be reached on +44 (0)333 006 0915 or at emma.erskine-fox@TLTsolicitors.com

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