engleski

THE IMPACT OF NEW ACCOUNTING MODEL OF FINANCIAL INSTRUMENTS ON THEIR CLASSIFICATION AND MEASUREMENT – THE CASE OF CROATIAN BANKING SECTOR

In order to improve financial reporting of financial instruments and eliminate certain deficiencies and limitations regarding recognition and measurement of financial instruments revealed by global financial crises, International Accounting Standards Board (IASB) has developed International Financial Reporting Standard 9 Financial Instruments (IFRS 9) which replaced former International Accounting Standards 39 Financial Instruments: Recognition and Measurement (IAS 39) on 1 January 2018. IFRS 9 established new criteria of classifying and, therefore, measuring financial instruments based on business model of certain financial instrument as opposed to IAS 39 which was rule based standard. The purpose of this paper is to identify and to analyse how were financial instruments previously classified and measured under IAS 39 reclassified and measured under IFRS 9 in Croatian banking sector. The paper also aims to identify to what extend the initial reclassification and measurement of financial instruments under IFRS 9 affected the financial position and performance of Croatian banking sector. The analysis of data regarding the reclassification process suggested that the implementation of IFRS 9 didn’t bring any changes regarding the classification and the way the financial instruments are subsequently measured in Croatian banking sector. However, the implementation of IFRS 9 did have impact on financial position and performance of Croatian banking sector due to the recognition of impairment losses and loss allowances according to expected loss model established in IFRS 9 and re-measurement of financial assets at fair value through profit or loss. The major effect on financial position and performance of banking sector in Croatia came from the recognition of additional impairment losses and loss allowances based on expected credit loss model rather than from re-measurement of financial assets at fair value through profit or loss. The research results also revealed that initial classification and measurement of financial instruments under IFRS 9 had stronger impact on financial performance than on financial position of Croatian banking sector.

financial instruments, IFRS 9, banking sector, Croatia

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