Draft Circular on public and confidential financial information standards and formats

Bank of Spain (BdE)

The accounting regime for Spanish credit institutions is regulated by the Circular 4/2004, of the Bank of Spain, on public and confidential financial information standards and formats. Through this Circular and its amendments, the Bank of Spain has implemented the International Financial Reporting Standards (IFRS) adopted in the EU.

IFRS 9 (Financial Instruments) and IFRS 15 (Revenue from Contracts with Customers) were adopted in the EU in 2016. These standards will be applicable to banking groups for preparing their consolidated annual accounts for the financial years starting from 1 January 2018.

In this context, the BdE has published a Draft Circular on public and confidential financial information standards and formats that will supersede Circular 4/2004, aimed to adapt the current accounting framework of the Spanish credit institutions to these accounting standards.

  • Among the amendments introduced by this Draft Circular and stemming from IFRS 9, special mention should be made of the following: i) amendments to the classification of financial assets for valuation purposes; ii) changes regarding impairment of financial assets, introducing a framework based on expected credit losses rather than on incurred losses; and iii) treatment of accounting hedges.
  • As for IFRS 15, the Draft Circular aims at introducing the new treatment of revenue recognition.

The technical note prepared by Management Solutions’ R&D department includes an analysis of the main content of this Draft Circular and specifies those aspects that are new when compared to the current framework.

Executive summary

This document addresses the amendments stemming from above mentioned accounting standards. Thus, it details the new framework regarding classification and measurement, impairment and accounting hedges; as well as the new revenue recognition model.

Scope of application

The document is applicable to credit institutions listed in Law 10/2014, branches of foreign credit institutions operating in Spain, groups of credit institutions, and consolidated groups of credit institutions.

Main content

  • Amendments from IFRS 9: classification and measurement of financial assets, impairment (including credit risk management framework, classification of transactions, loss provisioning, and foreclosed real estate assets), and accounting hedges.
  • Amendments from IFRS 15: new treatment of revenue recognition.
  • Financial statements: amendments in public and reserved financial statements to adapt them to the reporting models defined in the EU.

Download the technical note by clicking here (only in spanish).