The financial services industry has long operated in an environment of evolving accounting and regulatory requirements. While IFRS 9 has now become embedded in financial reporting frameworks, recent developments and the introduction of IFRS 18 are prompting financial institutions to revisit not only their accounting policies, but also how they communicate performance to investors and other stakeholders.
From an IFRS 9 perspective, Expected Credit Loss (ECL) models continue to be an area of significant focus for both auditors and regulators. Recent years have demonstrated the importance of ensuring that forward-looking information and management overlays are supported by robust evidence and governance. As economic conditions evolve, financial institutions are increasingly challenged to strike the right balance between responsiveness and consistency in their assumptions.
In practice, one of the most common issues is the application of significant judgment around staging assessments and macroeconomic scenarios. Regulators and audit firms continue to emphasize the need for transparent documentation, back-testing of models, and a clear rationale for management adjustments. Institutions that rely heavily on overlays without a strong supporting framework may find themselves subject to increased scrutiny.
At the same time, the introduction of IFRS 18 Presentation and Disclosure in Financial Statements, effective for annual reporting periods beginning on or after 1 January 2027, represents one of the most significant changes to financial statement presentation in recent years. Although IFRS 18 does not change recognition or measurement requirements, it introduces new requirements around the structure of the statement of profit or loss, enhanced disclosures, and the presentation of management-defined performance measures.
For financial services entities, these changes are particularly relevant. Banks, investment firms, insurers, and other financial institutions frequently use alternative performance measures to communicate results. Under IFRS 18, these metrics will require greater transparency and reconciliation to IFRS figures, increasing the importance of strong governance over non-GAAP measures and internal reporting processes.
Experience shows that institutions that begin assessing the implications early are better positioned to avoid implementation challenges and provide stakeholders with more meaningful and transparent financial information.
Ultimately, IFRS 9 and IFRS 18 developments are reinforcing a broader trend: financial reporting is increasingly about transparency, consistency, and the quality of management judgments. Organizations that proactively address these developments will be better placed to meet stakeholder expectations and maintain confidence in an increasingly demanding reporting environment.
At Baker Tilly, we help financial services organizations navigate evolving IFRS requirements by combining technical expertise with practical implementation experience, enabling institutions to strengthen both compliance and financial reporting quality.
