 IFRS 9 applies a single impairment model to all

financial instruments subject to impairment testing

while IAS 39 has different models for different
financial instruments.
 Impairment losses are recognized on initial
recognition, and at each subsequent reporting
period, even if the loss has not yet been incurred.
 In addition to past events and current conditions,
reasonable and supportable forecasts affecting
collectability are also considered when determining
the amount of impairment in accordance with IFRS 9.
 Financial assets measured at amortized cost
 Debt investments measured at fair value through OCI
(FVOCI)
 Trade receivables and contact assets
 Lease receivables within the scope of IAS 17/ IFRS 16
Leases
 Loan commitments that are not designated as at
(FVTPL)
 Financial guarantee contracts not designated as at
FVTPL
ECLs Approaches:

1. General Approach
an entity shall recognize a loss allowance for
expected credit losses on a financial asset, lease
receivable, loan commitment and a finance guarantee
contract to which the impairment requirements.
 Stage 1 Stage 2 Stage 3
• Credit risk has not • Credit risk has increased • Credit risk has increased
increased significantly significantly since initial significantly since initial
since initial recognition. recognition. recognition plus there is
• ‘Low credit risk’ objective evidence of
expediency impairment.
 Recognize 12-month  Recognize Lifetime  Recognize Lifetime
expected credit losses expected credit losses. expected credit losses
 Interest revenue is  Interest revenue is  Interest revenue is
computed on the gross computed on the gross computed on the net
carrying amount of the carrying amount of the carrying amount (i.e.,
asset asset gross carrying amount
less loss allowance)
Determining significant increases in credit risk
 credit risk is assessed at each reporting date.
 compare the risk of a default on the financial instrument
at the reporting date with the risk of default at the date of
initial recognition.

Modified financial assets

(a) the risk of a default occurring at the reporting date
(b) the risk of a default occurring at initial recognition
Purchased or originated credit-impaired financial
assets

 an entity shall only recognize the cumulative changes in

lifetime expected credit losses since initial recognition as
a loss allowance for purchased or originated credit-
impaired financial assets.
2. Simplified Approach
an entity shall always measure the loss
allowance at an amount equal to lifetime expected
credit losses.

(a) trade receivables or contract assets that resulted

from transactions that are within the scope of IFRS
15
(b) Lease receivable that resulted from the transactions
under the scope of IAS 17
3. Credit Adjusted Approach
applies only rarely when an entity acquires or
originates a loan or receivable that is “credit impaired”
at the date of its initial recognition.

 an asset is credit impaired when one or more events

that have a detrimental effect on the estimated future
cash flows of the asset have occurred.
 General Simplified Credit Adjusted
Approach Approach Approach

Applies to All other loans and Qualifying trade Assets that are
receivables not receivables, IFRS 15 credit impaired at
covered by another contract assets and initial recognition
approach lease receivables
Timing of initial Same period as Same as general
recognition asset is acquired approach
Cumulative change
Measurement basis 12 month ECLs unless in Lifetime ECLs since
of the loss allowance a significant initial recognition
increase in credit Lifetime ECLs
risk occurs, then
lifetime ECLs unless
the increase reverses
Basic Principles:
IFRS 9 provides that in measuring expected credit
losses an entity must reflect:
 An unbiased evaluation of a range of possible
outcomes and their probabilities of occurrence.
 Discounting for the time value of money.
 Reasonable and supportable information that is
available without undue cost or effort at the reporting
date about past events, current conditions and
forecasts of future economic conditions.
 “Key Differences Between The Standards”
IAS 39
INCURRED LOSS
MODEL
 Delays the recognition of credit
losses until there is objective
evidence of impairment.
 Only past events and current
conditions are considered when
determining the amount of
impairment.
 Different impairment models for
different financial instruments
subject to impairment testing,
including equity investments
classified as available-for-sale.
IFRS 9
EXPECTED CREDIT
LOSS MODEL
 ECLs are recognized at each
reporting period, even if no
actual loss events have taken
place.
 In addition to past events and
current conditions, reasonable
and supportable forward-looking
information that is available
without undue cost or effort is
considered in determining
impairment.
 The model will be applied to all
financial instruments subject to
impairment testing.
 IFRS 9 – IAS 39
Amortized Cost and Amortized Cost
FVOCI assets FVOCI assets
assets
 Method of Loss allowance Either by direct reduction Decline in fair value
recognition of the asset or an recognized in OCI
allowance transferred to profit and
loss
 Basis for recognition Expected credit losses Objective evidence of Objective evidence of
impairment impairment
 Basis for 12 month or Difference between Difference between
measurement Lifetime ECLs, as asset’s carrying amount acquisition cost (net of any
applicable and the present value of principal repayment and
estimated future cash amortization) and current
flows discounted at the fair value, less any
asset’s original effective previously recognized
interest rate impairments
 Restrictions on Reversal can be related Reversal can be
recognition of objectively to an event objectively related to an
reversal of None occurring after the event occurring after the
impairment losses in impairment, subject to a impairment (applies only
profit and loss limit to debt instruments)