Finansielle instrumenter: Nedskrivning

Palle Falkebo

Student thesis: Master thesis


Over the years, the accounting rules in the area of financial instruments have been heavily criticised. Most recently, the financial crisis has intensified the criticism of IAS 39. One of the area considered especially problematic is depreciation of financial asserts. The accounting policy currently in force is built on a principal of incurred loss. The policy is criticised for recognising loss to late with a procyclical effect as consequence as well as recognition and measurement lack relevance. IASB has together with FASB initiated a reformation of the accounting rules in the area for financial instruments by request of the G20 counties. In this connection, an expert group has been appointed. Among other things, the Financial Crisis Advisory Group (FCAG) points to the late recognition of loss as a weakness in the current accounting policy and recommends IASB to examine the possibility of an accounting policy based on recognition after a principal of expected loss. The reformation of the area amortised cost and impairment of financial assets was initiated in June 2009. Since then, IASB has published drafts on which interested parties have made comments. The following analysis of the accounting rules currently in force compared to the proposed accounting rules shows that information in accounting policies risk becoming unreliable, that comparability across organisations becomes blurred and finally, that a change in accounting policies is unlikely to produce more stable banks. This is shown in part by an initial comparative analysis of the accounting rules, in which weaknesses are pointed out, partly my means of an empiric statistical analysis of Danish bank’s presentation of financial statements. The interested parties are, in general, positive in correlation with recognising loss based on future expectations. However, the interest group is to a great extent represented by those who present financial statements, who are concerned by the implementation of new accounting policies in their accounting and risk handling systems. Furthermore, the latest draft is characterised by being a compromise between two approaches to financial statements. This seems to result in an unnecessary complicated and burdensome approach is part because of the increase of an infinitive number of subjective estimates and choices. This causes concerns in correlation with both the comparability across organisations and the reliability of the information given based on the proposed policy. Before 2005, Danish banks recognised provisions made for loss by a principal of future expectations. The statistic examination shows that the quality of the financial statements has increased after 2005, as a consequence of a change in accounting policies in the area of recognition and measurement of loans. This is concluded in part from a small variation in the results after 2005 and in part from a larger variation in the results before provisions that after provisions in the period before 2005, which cannot be found after 2005. Finally, it can be shown that results before provisions can explain the size of the banks’ provisions in the period before 2005, which is not the case after 2005. The quality of the financial statements is assessed by a variation in the development of the banks’ results on the basis of the reasoning that it indicates income elimination. Hereby, a point of departure has been made in previous examinations which measures quality of financial statements. Historically, there is no statistical evidence which show that an accounting policy based on a principal of expected loss provides more stable banks or is the cause of procyclicality. This is due to the fact that banks in Denmark manage their capital structure by the capital adequacy rules, which are based on an assessment of risk and therefore on the expectations of future loss. Concurrently, it has been found that banks did not reduce their real capital structure as a consequence of the changed accounting policy in 2005, which is why it can be concluded that the average bank is as stable now as before 2005.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2011
Number of pages121