Abstract

The International Financial Reporting Standard (IFRS) 9 presents the latest accounting treatment for financial assets and liabilities, impairment procedures, hedge and fair value accounting. This new regulation largely replaces the International Accounting Standards 39. The last form of IFRS 9 was published in July 2014 with the mandatory global compliance date for IFRS 9 set on January 1, 2018, with earlier application encouraged. The main distinctive features of this standard are described in terms of hedge accounting, recognition and classification, and fair value measurement of the financial instruments. The objective of the research study was to determine the impact of the mandatory adoption of IFRS 9 on the financial performance of commercial banks in Kenya. The study adopted an event study approach or design by analyzing the quarterly financial statements of the commercial banks submitted to the Central Bank of Kenya and comparing the performance of the commercial banks before the introduction of the IFRS 9 and after its adoption. The study’s findings were that returns on assets and returns on equity were on an upward trend despite the introduction of IFRS 9. This was contrary to the expectation of poor performance since lower earnings due to loan loss provisions were expected to have a material effect on profitability.

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