Adoption and Implementation of IFRS in the Regional Banking Sector : Key Challenges

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Presentation at the "IASB Middle East Policy Forum" - May 2008

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Adoption and Implementation of IFRS in the Regional Banking Sector : Key Challenges

  1. 1. Emirates NBD Middle East Policy Forum Adoption & Implementation of IFRS in the Regional Banking Sector : Key Challenges Sanjay Uppal Group Chief Financial Officer Emirates Bank Dubai. 13 May 2008
  2. 2. Key challenges : IAS IAS 1 : Presentation of Financial Statements Insight vs. Information overload Information Recipients – relevance & use IAS 39 : Financial Instruments – Recognition & Measurement Liquidity Issues / Free Float Fair Value vs. Fire Value Aggravated Credit Meltdown Securitization Issues Fair Valuation of Debt ? 1
  3. 3. Key challenges : IAS IAS 19 : Employee Benefits Limited Actuary capabilities in the market IAS 20 : Accounting for Government Grants & disclosure of Govt Assistance Inconsistent adoption Disclosure Requirements / robustness 2
  4. 4. Key challenges : IAS IAS 24 : Related Party Disclosures Sovereign Ownership IAS 40 : Investment Property Valuation challenges in the Region Fair Value ? Inconsistencies amongst Banks 3
  5. 5. Key challenges : IFRS IFRS 3 : Business Combinations Share f Share E h Sh for Sh Exchange Deterrent to domestic consolidation ? Proforma / Business Combination – Investor Communication Valuation of Core deposit Intangible - ‘Hot Money’ Pooling of Interest ? IFRS 7 : Financial Instruments - Disclosures Insight I i ht vs. Information overload I f ti l d Information Recipients – relevance & use 4
  6. 6. Key challenges : Others Property Companies & Businesses Percentage of Completion vs. Completed Contracts True Value of Company ? fC Islamic Banking IAS & IFRS adoption ? Banking business vs. Private Equity vs. Asset Management Opinion difference in Sharia Boards Consolidation of strategic equity participations & private equity i t C lid ti f t t i it ti i ti i t it interests t Previously recognized on the basis of equity accounting Consequence for those banks which actively engaged in p q y g g private equity q y 5
  7. 7. Key challenges : Others Board of Directors buy-in & support Legacy systems Awareness : Under-estimation of effort requirement Data gaps : New data requirements Materiality : Definition Conflicts with other projects (e.g. Basel II) Acceptance of change in the institution Knowledge transfer & training IFRS interpretation issues & market inconsistencies p Resource availability : Skill & experience Regulatory environment 6

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