X

IFRS Banner

IFRS Course

IFRS Icon

Methodologies for Determining Expected Credit Loss under IFRS 9 (3 days)

Course Details

Code:1221
Level
Intermediate
CPD
24 Hours
Time
09:00-18:00
Location
London
Cost
£3,900.00
Subject to UK VAT (Read more)
Do you need to train a group of employees?
Tell us your training needs, and we will plan an agenda to address the issues that matter most to your organization.
Enquire Now

Introduction

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 on this course might also be interested in our 2-day training 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.

Who Should Attend

  • Financial and management accountants in corporate and financial institutions
  • Staff in treasury, operations, risk management, IT or compliance departments
  • Internal auditors of entities reporting under IFRSs
  • External auditors with clients facing the complexities and challenges in adopting and implementing IFRS 9
  • Staff and management of Central Banks, Deposit Insurance Entities, and other agencies with regulatory responsibility in the financial services sector
  • Financial analysts seeking to improve their understanding of the accounting and disclosures related to financial instruments and the changes introduced by IFRS 9
  • Professors and other instructors with educational facilities
  • First-time adopters of IFRSs, seeking to analyze the implications of applying IFRS 9 initially

Topics

  • Overview of the impairment requirements in IFRS 9 how are they different from IAS 39.
    • Why the requirements are different and what are they trying to achieve;
    • Objectives of ECL measurement under IFRS 9.
  • Step 1 - Creating portfolios with similar credit risk characteristics
    • IFRS 9 requirements;
    • How to define similar credit risk characteristics;
    • Policies and controls needed to implement the above.
  • Step 2 - Policies for determining Staging of Financial Assets
    • IFRS 9 requirements;
    • What measure of credit risk to use for determining staging;
    • Policies and controls for Staging.
  • Step 3 - Determining the Base Case Measure of Credit Risk
    • IFRS 9 requirements;
    • Determining Life Time measure of credit risk using loss rates and weighted average residual maturity incorporating forward looking information;
    • Determining 12 month measure of credit risk using loss rates and weighted average residual maturity incorporating forward looking information;
    • How to adjust loss rates to determine credit risk without impact of collateral;
    • How does the above method compare with PD / LGD methodology;
    • When is it appropriate to use the above methodology;
    • Policies and controls pertaining to the determination of the above measures.
  • Step 4 - Multiple Scenarios
    • When do we need to consider multiple scenarios.
    • How to adjust Base Case Measures of Credit Risk using multiple scenarios;
    • How to use past data to calibrate such measures;
    • Policies and controls pertaining to the determination of the above measures.
  • Step 5 - How to incorporate time value of money in the above computations.
  • Step 6 - Bringing it all together - arriving at the provision for Expected Credit Losses under IFRS 9.
  • Step 7 - Demonstration of transfer of financial assets from Stage 1 to Stage 2.
  • Step 8 - A brief look at the disclosure requirements.

Teaching Method

  • Interactive knowledge transfer ‘classroom style’ sessions covering the requirements of IFRS 9 and relevant ECL methodologies; and
  • Interactive skills development ‘workshop style’ sessions using excel to arrive at the loan loss provision under IFRS 9.
  • All participants will receive a comprehensive binder containing copies of the presentation slides, hand-outs and other course materials.
  • Participants should be comfortable with using excel and should have access to a computer with excel during the course.

Instructors

The instructor for this course will be drawn from one of our core faculty of subject matter experts. Further details will be published at the earliest opportunity.

Venue

Our seminars take place in 4 star professional conference facilities, generally in city-centre hotels like the Marriott, Sheraton or Hilton brands. Detailed Joining Instructions are sent to all registered delegates by email approximately one month before the event. The Joining Instructions will confirm exact venue details and nearby (or onsite) hotel recommendations with bedroom rates where available. Coffee and lunch will be provided.

CPE/CPD Accreditation

IASeminars is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org .

 

Field of study: Accounting

Prerequisites

No advance preparation is required for this course. Participants should be comfortable with using excel and should have access to a computer with excel during the course.