The Group’s interim financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) adopted by the EU as of 31.12.2017. The interim report has been prepared in accordance with IAS 34 Interim Financial Reporting.
The financial statements are presented in Norwegian kroner (NOK), which is also the Parent Bank's and subsidiaries' functional currency.
The interim report is prepared in accordance with the accounting principles and measurement methods used in the annual financial statements for 2016. There have been no significant changes or new standards in 2017. Please refer to the annual report for 2016 for a more detailed description of these accounting principles.
IFRS 9 is effective from 1.1.2018. IFRS 9 introduces a business-oriented model for classification and measurement of financial assets, an expected loss model for impairments and a new general model for hedge accounting. The standard will replace the current standard IAS 39.
For the Sparebanken Møre Group, the transition to IFRS 9 will have implications for accounting of value changes on shares being classified as ‘held available for sale’ under IAS 39, for accounting of the Group’s value changes on basis swaps, included in hedge accounting, and for the calculation of the Group’s impairments.
The measurement category of ‘shares held available for sale’ with value changes reported through other comprehensive income ceases to exist from 1.1.2018. The Group’s value changes on shares and equity instruments will be recognised in ordinary profit and loss from this date.
The value change on the Group’s basis swaps, included in hedge accounting, has been recognised in ordinary profit and loss up to 31.12.2017. As of 1.1.2018, value changes on basis swaps due to changes in basis spreads will be recognised in other comprehensive income as cost of hedging.
Under IAS 39, impairments were based on objective evidence of impairment (an accrued loss model). Impairments according to IFRS 9 will as of 1.1.2018 be based on expected credit loss (ECL). Sparebanken Møre has developed an ECL model based on the Group’s IRB parameters. Estimated expected losses for the Sparebanken Møre Group as of 1.1.2018 show an increase in total impairments of NOK 6 million.
The Group’s equity will 1.1.2018 be charged with NOK 5 million after tax as a result of the implementation of IFRS 9.
The implementation of IFRS 9 will have no effect on the Group’s primary capital, as expected loss according to the capital adequacy requirements already exceeds the expected losses according to IFRS 9. Sparebanken Møre will therefore have no need to apply the transitional rule.
A note with tables specifying transition effects as a result of the implementation of IFRS 9, including effects on both classification and measurement, will be presented in the 2017 annual report.