Question

In IFRS 9 is it possible (for a highly rated asset - AAA) not to record an expected credit loss?

Answer 1

Hello

No, it is not allowed as per IFRS 9.As per IFRS 9 financial instruments that have not had a significant increase  in credit

risk since initial recognition or that have low credit risk at the reporting date. For these

assets, 12-month expected credit losses (‘ECL’) are recognised and interest revenue is

calculated on the gross carrying amount of the asset (that is, without deduction for credit

allowance). 12-month ECL are the expected credit losses that result from default events

that are possible within 12 months after the reporting date. It is not the expected cash

Regards shortfalls over the 12-month period but the entire credit loss on an asset weighted by the

probability that the loss will occur in the next 12 months.

regards

Answer 2

Yes. Every financial instrument requires to be evaluated for impairment on the reporting date. Generally, it has to be at 12 months' ECL. However. When there is significant increase in the risk, Lifetime ECL  is required to be estimated.