Securitization and IFRS Standards: In-Depth Analysis of Concepts, Regulation, and Impact on Accounting

Abstract

This article explores the complex relationship between securitization, International Financial Reporting Standards (IFRS), and financial results management.

Securitization involves bundling financial assets like loans or mortgages to turn them into negotiable securities in the financial markets. This process enables banks to improve their liquidity and regulatory ratios by removing these assets from their balance sheet. However, this practice also creates incentives for companies to manipulate their accounts to present a more favorable financial situation.

The IFRS standards have gradually evolved to better govern the accounting for securitization, particularly with IFRS 9 concerning the classification and valuation of financial assets, and IFRS 10 on consolidation. The aim is to enhance the transparency and reliability of the published financial information.

Nevertheless, some studies indicate that certain companies have resorted to securitization practices to artificially smooth or inflate their results through methods like overvaluing assets or overly optimistic adjustments of accounting estimates.

While securitization remains a useful tool for financial institutions, it requires a high level of transparency to avoid any accounting manipulation. The new IFRS standards bring more clarity to the accounting treatment, but questions remain about their ability to fully prevent such manipulations.

Therefore, this article aims to critically analyze how the IFRS standards address this complex issue in connection with the challenges of securitization, results management, and financial transparency.