In a statement, IOSCO said that it remained ‘fully committed to the development, consistent application and enforcement of high-quality accounting standards which are of critical importance to the proper functioning of the capital markets—especially in times of uncertainty’.

In particular, the organisation highlighted the need to exercise professional judgment around IFRS 9 Financial Instruments, while welcoming the International Accounting Standards Board’s recent educational materials that address the application of accounting for expected credit losses (ECL).

IOSCO said: ‘High quality financial reporting requires the application of professional judgment to an issuer’s particular circumstances. Proper application of professional judgment requires appropriate skills, experience and internal controls.

‘In particular, IFRS 9 does not set bright lines and should not be applied in a mechanistic manner. IFRS 9 provides a principles-based framework for applying professional judgment in evaluating forward-looking scenarios when estimating expected credit losses related to financial instruments measured at amortised costs or fair value through Other Comprehensive Income.’

IOSCO highlighted the fact that in response to the covid-19 pandemic, a number of governments, authorities and regulators across the globe have adopted relief programmes aimed at financial institutions, businesses and households resulting in increased liquidity, debt payment holidays, moratoriums on repayment of loans and mortgages, loan guarantees and other support measures.

‘Issuers will need to consider, as well, the positive impacts of such measures in the credit risk over the expected life of the instruments and use forward-looking information such as long-term economic forecasts supported by the best available information,’ the organisation said.

‘Issuers should include robust disclosures of material information that can provide much needed transparency to users of financial statements. Such disclosure considerations should include how issuers have taken into account the various issues discussed above in determining their ECL approach.’