Learning Objectives:

  • Understand the core accounting principles and concepts applied to banking.

  • Distinguish between IFRS and US GAAP in banking contexts.

  • Explain the structure and purpose of the uniform chart of accounts for banks.

1.1 Core Accounting Principles in Banking

Accounting for banks is built on the same foundational principles as general accounting but applied to the unique business of banking. As the ETSU course notes, students must develop “a strong basic knowledge of accounting terms, concepts, and procedures” . The University of Malta’s study-unit on Accounting for Bankers covers “Accounting standards associated with Banking” as a core component .

Key principles include:

  • Accrual Accounting: Revenue and expenses are recognised when earned or incurred, regardless of when cash changes hands.

  • Prudence: Assets and income are not overstated; liabilities and expenses are not understated.

  • Substance Over Form: The economic reality of transactions is reported, not just their legal form.

  • Going Concern: Banks are assumed to continue operating, affecting asset valuation and liability classification.

1.2 IFRS vs. US GAAP – Key Differences in Banking

The GICP course emphasises understanding the “impact of differing accounting standards and policies (e.g. provisioning, asset valuation, securitisation etc.) on the financial statements” . Major differences between IFRS and US GAAP/Swiss GAAP include :

 
 
Area IFRS US GAAP
Financial Asset Classification Comprehensive model based on business model and cash flow characteristics More rules-based, with categories like held-to-maturity, available-for-sale, and trading
Credit Losses (Impairment) Expected Credit Loss (ECL) model under IFRS 9 Incurred Loss model (CECL under current expected credit loss)
Hedge Accounting More flexible, with broader hedging relationships permitted More restrictive and rules-based
Leasing Lessee recognises right-of-use asset and lease liability Similar but with differences in classification
Goodwill Not amortised, tested annually for impairment Not amortised, tested annually for impairment

The HKU Business School course notes that “the financial statements of financial institutions are increasingly based on fair value accounting” .

1.3 The Uniform Chart of Accounts

Banks use a standardised chart of accounts to ensure consistency in financial reporting. Major account categories include:

  • Assets: Cash, due from banks, securities, loans, fixed assets

  • Liabilities: Deposits, borrowings, provisions

  • Equity: Share capital, reserves, retained earnings

  • Income: Interest income, fee income, trading income

  • Expenses: Interest expense, operating expenses, provisions

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