How to treat ECL with maturity less than one year

Question

How to treat the ECL when the maturity is less than one year? Is interpolation needed or simply using lifetime ECL to be the 12month ECL? Is there any reference?

Answer 1

Yes I think you should use interpolation. Are you doing a credit review of a bank/financial institution by the way?

If your trade receivables do not contain significant financing component, you can recognize lifetime expected credit losses right on initial recognition.

Moreover, as a simplification, you can use so-called provision matrix.

Check out:

*****://***.pwc.***/ca/en/accounting-advisory-services/publications/us2014-06-ifrs-9-expected-credit-losses.pdf

http://***.ey.***/Publication/vwLUAssets/Applying_IFRS:_Impairment_of_financial_instruments_under_IFRS_9/$FILE/Apply-FI-Dec2014.pdf

http://***.ifrsbox.***/ifrs-9-expected-credit-loss/