Internal Capital Adequacy Assessment Process -
The below outlines what some of the key items that should be considered and assessed within a Firm’s ICAAP.
The accounting framework a firm uses may be based upon either National or International accounting practices and standards.
The majority of firms we have encountered within the UK invariably use National GAAP, which relates to standard accounting practices within the UK (short for Generally Accepted Accounting Principles); however some firms may have chosen to base their accounting framework on International Financial Reporting Standards (IFRS).
International Financial Reporting Standards (IFRS) are set by the International Accounting Standards Board (the ‘IASB’). The current model for IFRS is set to be replaced soon by a new model referred to as IFRS 9.
IFRS 9 has taken several years to develop and is set to introduce new approaches, such as for the classification of financial assets amongst others, that will fundamentally re-
The mandatory effective date for the new IFRS 9 standard is at the start of next year (1st January 2018), however firms that base their accounts on the IFRS model will have to take action much sooner than that. Firms using IFRS must start to evaluate the impact the new accounting model will have on them and prepare for any additional data analysis and the implementation of any changes to systems and controls that might be necessary.
In December 2016, the PRA issued clarification on IFRS 9 in relation to 2017 ICAAP stress testing and capital planning. (The announcement can be seen on the PRA’s stress test scenario webpage).
The PRA’s clarification lays out the information on how firms should incorporate IFRS 9 into their stress testing and capital planning that is carried out as part of their Internal Capital Adequacy Assessment Process (ICAAP) for the new year (2017).
To clarify, the PRA informs that this is only applicable to:
This clarification looks to encourage firms that apply IFRS to their accounting practices reinforce the need to be prepared for the new accounting standard and to have -
ICAAP Support Services
If your firm would like information on our ICAAP support services such as assistance in examining your ICAAP to ensure it is appropriately assessed for your current business plan and activities or assistance in documenting this review, please contact us. Our experienced ICAAP Consultants would be happy to help, so send an enquiry or telephone today.
020 3813 2890