J.P. Morgan Asset Management (“JPMAM”) investment team’s primary role is to manage our client’s portfolios in accordance with their individual guidelines and objectives while being mindful of the current and upcoming changing regulatory environment. Because of various balance sheet and income statement considerations, JPMAM deploys additional resources such as our team of investment accounting and regulatory specialists, whose role is to assist our clients with any accounting related queries and portfolio analysis, e.g. for International Financial Reporting Standard (IFRS) 9 compliance and impairment purposes.
Defining policy and procedures
In this document, we provide our thoughts, based on our professional judgement, on IFRS 9 and other related issues, with the expectation that clients would provide definitive clarity on their individual policies and investment guidelines regarding the following aspects of IFRS 9:
Once a framework for the above mentioned issues is in place, we can continue to provide support through our own independent analysis and expertise on particular investment-related accounting and regulatory guidance matters. However, any final decision on policy and procedures resides with the client and its auditors to define at their own discretion.
- Solely Payments of Principal and Interest (“SPPI”) test: details of the SPPI policy that is adopted per IFRS 9, including the exact definitions of what should be analysed for instruments to qualify under the SPPI policy
- Impairment testing policy: details of impairment test including what quantitative and qualitative criteria are assessed for a holding to be considered for impairment
- Expected Credit Loss (ECL) policy: assumptions and details on how ECL is calculated, including probability of default and loss given default; and
- Guidelines: changes to any existing investment guidelines based on the implementation of IFRS 9. Also, an open and ongoing dialogue between JPMAM investment teams and each client will be important regarding any securities and the impact of the new IFRS 9 rules, once the framework is implemented.