Dáil Éireann Debate, Tuesday - 28 January 2014
328. Deputy Pearse Doherty asked the Minister for Jobs, Enterprise and Innovation further to Parliamentary Question No. 286 of 15 January 2014, his views on whether paragraph 59 of IAS 39 as referenced-losses expected as a result of future events, no matter how likely, are not recognised means that banks, albeit for a temporary period, are allowed to delay the recognition of expected losses and therefore overvalue loans in their published accounts. [3561/14]
View answer329. Deputy Pearse Doherty asked the Minister for Jobs, Enterprise and Innovation his views on whether, for the period 2005 to the present, the non-recognition of expected losses to the extent carried out by Irish banks is contrary to paragraphs 14 and 37 of the IASB framework as endorsed by the European Union; and if he will make a statement on the matter. [3562/14]
View answerI propose to take Questions Nos. 328 and 329 together.
Paragraph 59 of International Accounting Standard 39 (IAS 39) “Financial Instruments: Recognition and Measurement” explicitly precludes the recognition of losses expected as a result of future events, no matter how likely. Paragraph 59 falls within the part of IAS 39 that deals with “impairment and uncollectability of financial assets measured at amortised cost”, so that it applies to (among other things) loans that banks have advanced to customers.
Paragraph 59 of IAS 39 requires that there must be objective evidence of impairment as a result of a “loss event” (also known as a “trigger event”). The determination of whether a loss event (within the meaning of IAS 39) has or has not occurred involves a degree of subjective judgement, in the exercise of which prudence or conservatism may be appropriate. The exercise of prudence or conservatism in such circumstances does not imply the recognition of expected losses.
The IASB “Framework for the Preparation and Presentation of Financial Statements”, which was superseded by the “Conceptual Framework” in 2010, was not an International Accounting Standard or International Financial Reporting Standard and therefore endorsement or adoption by the EU under Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 (the “IAS Regulation”) did not arise.
The individual standards adopted under Regulation 1606/2002 set out the accounting requirements with which companies to which they are applicable must comply.
