The single biggest change brought in by IFRS 9 Financial Instruments is expected credit loss (ECL) impairment accounting. The impairment requirements in IFRS 9 radically change how financial assets loss provisioning is considered in the financial statements - a key area for banks. The ECL impairment requirements for the first time ask entities to use techniques that require them to arrive at an estimate of losses based on their expectations of future conditions. By its very nature it is modeling and data intensive.

Neither IFRS 9 nor US GAAP mandates the use of one particular methodology for the measurement of ECL. IFRS 9, in particular, stipulates that any methodology used should be compliant with the objectives of ECL measurement. When portfolios of financial assets are managed for credit risk using methodologies other than PD/LGD i.e. rather than on the basis of default probabilities, IFRS 9 allows for techniques other than PD/LGD that are simpler from a modeling and data perspective, such as loss rates and Weighted Average Residual Maturity, to be used for determining ECL.

At the end of this seminar participants will:

  • Have an understanding of IFRS 9 ECL requirements
  • Have an understanding of methodologies other than PD/LGD and their applicability for the purposes of determining the loan loss provisions under IFRS 9;
  • Have an understanding of how to apply these methodologies to portfolios of financial assets using excel;
  • How to document and control the use of such methodologies.

The course does not aim to provide participants with black box calculators for the determining ECL but instead to focus on the principles and techniques necessary to build such ECL models and understand their implications. It should also be noted that Probability of Default (PD) and Loss Given Default (LGD) are not covered in this session.

Participants of this course might also be interested in our 2-day course on Fair Value Measurement of Financial Instruments under IFRS 13.

Learning Objectives

  • IFRS 9 requirements on ECL;
  • Identify and implement IFRS 9 compliant ECL methodologies other than PD/LGD.
  • Understand how to apply them to portfolios of financial assets using excel.
  • Understand the documentation and control requirements arising from the implementation of such methodologies.

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Skill Level: Beginner