A Proposed Model for Developing Accounting for Financial Risks Within Non-banking Finance Companies Under Economic Variables and Regulatory Technology: Analysis of Previous Studies and Literature Review

Abstract This chapter attempts to develop a model for developing financial risk accounting within non-banking finance companies (NBFCs) according to economic variables. By updates to International Financial Reporting Standards No. 9, 7, and also according to regulatory technology (RegTech) variables in light of the introduction of technology into corporate procedures and laws as a tool for managing non-compliance risks. After conducting the review on exerted efforts made and developments by professional bodies and countries’ experiences towards developing financial risk accounting within the non-banking financial activities sector. This paper concluded that there are updates on accounting standards that mentioned financial risks, such as international financial reporting standards 9 (IFRS 9), which deals with credit risks by the expected credit losses (ECL) model. Also, IFRS 7 requires entities to disclose information related to financial risks, including market risks, credit risks and liquidity risks, which aims to provide useful information for users to understand the risks faced by entities. These standards help improve transparency and disclosure of financial risks, enabling investors and other users to make informed decisions. Accordingly, a model was proposed that, when applied, can develop accounting for financial risks within NBFCs. In light of the economic changes, including the liberalisation of the exchange rate, this had an impact on enhancing the development of IFRS that discuss financial risks to accommodate the developments resulting from the impact of currency liberalisation on business environments, as well as the developments in RegTech to manage the risks of non-compliance and the cost of violations and fines.