Most of Australia's banks are yet to completely adopt changes to an accounting standard that alters the way in which banks present information about their assets and liabilities, including new rules for the way estimated credit losses are number crunched.The new requirements are a result of a rethink of the financial instruments accounting standard, following concerns that the rules in existence at the time of the global financial crisis failed to prepare shareholders and others for loan defaults that were to follow.The new standard, AASB 9, requires banks to account for loss provisions in a way that brings loss provisions into the financial statements so users of the accounts will have a greater appreciation of the dollar amount that could be at risk of default if economic conditions deteriorate.AASB 9 imposes a three stage process to recognise increases in credit risk - when credit risk has risen but is not yet credit impaired. The final stage requires an acknowledgement of credit impairment.Banks must be ready to report in accordance with these rules for financial years beginning on or after 1 January 2018, with only one bank, National Australia Bank, having moved early and adopted the new standard in its entirety. Other banks such as the Commonwealth Bank and ANZ have adopted only the credit loss provisioning of the standard early.The need for implementation readiness was reinforced on 21 April 2017 by the Australian Prudential Regulatory Authority in a letter to all deposit taking institutions. "Under this accounting standard, the move to an expected credit loss impairment approach for loans and other exposures represents an area of significant change. APRA confirms that ADIs using the prescribed provisioning approach under Prudential Standard APS 220 Credit Quality (APS 220) may continue to do so for APRA reporting purposes," APRA's advice to those subject to its regulation states. "It is APRA's understanding that for financial reporting purposes ADIs may continue to use their current prescribed provisioning approach as a basis for determining AASB 9 provisions subject to adjustments and signoffs by their external auditors."An attachment to APRA's reminder says that the new rules related to loss provisioning in the financial statements do not specify a specific approach for measuring expected credit losses or assessing changes in credit risk. "The appropriate approach will vary, taking into account the differing levels of sophistication of entities, the nature of the financial instrument and the availability of data," APRA states.The prudential regulator has also noted smaller institutions would find the shift from the old to the new demanding."APRA expects that AASB 9 will present a number of challenges for smaller ADIs. These challenges include assessing changes in credit risk and using forward looking information to calculate provisions," the APRA analysis of the regulatory impact states. "AASB 9 does not preclude the use of a regulatory provisioning based approach provided this regulatory provisioning approach complies with the accounting impairment measurement requirements. "APRA therefore expects ADIs currently using prescribed provisioning may continue to do so. The accounting provisions would, however,