A Lancaster University Management School Professor delivered valuable evidence to help international accounting policy-makers.

Professor Argyro Panaretou, from the Department of Accounting and Finance, provided academic evidence at the February 2024 public meeting of the International Accounting Standards Board (IASB) in London.

IASB is the standard-setting board that develops the International Financial Reporting Standards (IFRS), which are required in more than 140 jurisdictions and permitted in many more.

Professor Panaretou was part of a centred on a paper she co-authored with IASB Technical Staff. She said: “This was a fantastic opportunity for our research to inform the International Accounting standard setters.”

The evidence provided by Professor Panaretou and her co-authors relates to the post-implementation review (PIR) of the impairment requirements in IFRS 9: Financial Instruments. Financial instruments are contracts that result in a financial asset in one entity and a financial liability or equity in another. The review by the IASB is assessing the effects of applying new accounting requirements on users and preparers of financial statements, auditors, and regulators.

IFRS 9 specifies how an organisation should classify and measure its financial assets and liabilities, and some contracts to buy or sell non-financial items. Impairment requirements in IFRS 9 deal with how an organisation should recognise expected credit losses on its assets.

As an expert in accounting for financial instruments, Professor Panaretou presented academic evidence on whether these impairment requirements improved the reporting of financial instruments, providing information to financial statement users that enables them to assess the amounts, timing, and uncertainty of an entity’s future cash flows.

“Academic evidence supports the view that the implementation of IFRS 9 has improved the timeliness of recognition of credit losses,” said Professor Panaretou. “However, research also indicates that entities apply more varying approaches to determine credit losses relative to the approaches used in the period before IFRS 9 implementation. This is primarily due to the high degree of management judgment or discretion involved in applying IFRS 9.”