IFRS 9 educational document published on application of IFRS 9 During Covid-19 Outbreak
An educational document has been published on the ifrs.org website that seeks to respond to questions regarding the application of IFRS 9 Financial Instruments during the COVID-19 outbreak.
The document highlights requirements within IFRS that are relevant for entities considering how the pandemic affects their accounting for expected credit losses (ECL). The document is intended to support the consistent and robust application of IFRS 9, and does not change, remove nor add to, its requirements.
IFRS 9 contains a framework that requires that lifetime ECLs be recognised when there is a significant increase in credit risk (SICR) on a financial instrument. However, in the current unprecedented circumstances, the challenge of estimating ECL on financial instruments is recognised as is the importance of companies using all reasonable and supportable information available, historic, current and forward-looking to the extent possible, when determining whether lifetime losses should be recognised on loans and in measuring ECL.
It is highlighted that IFRS 9 does not provide bright lines nor a mechanistic approach in accounting for ECLs. Therefore, entities may need to adjust their approaches to forecasting and determining when lifetime losses should be recognised to reflect the current situation.
It is noted that the IFRS Foundation and the International Accounting Standards Board (IASB) continue to work in close cooperation with regulators and others regarding the application of IFRS 9 during the COVID-19 outbreak. Entities are encouraged to consider guidance provided by prudential and securities regulators.
