The new expected credit loss model for the impairment of financial instruments has triggered a variety of implementation issues.
At its second substantive meeting, in September 2015 the IFRS Transition Resource Group for Impairment of Financial Instruments (the ITG) discussed a number of issues that were submitted by stakeholders.
For more detail on the ITG’s discussions, read Issue 2 of our IFRS Newsletter: IFRS 9 Impairment.
The IASB Board members in attendance believed that estimates of expected credit losses on revolving credit facilities should not include losses on draw-downs that exceed contractual credit limits.
Additionally, ITG members appeared to agree that internal credit risk ratings and behavioural indicators may be valuable tools in applying the new standard.
The discussions also covered methods of assessing for significant increases in credit risk, and the use of forward-looking information when measuring expected credit losses (ECLs).
On most issues, members of the group generally appeared to agree on the interpretation of the standard. In some cases, they provided further clarifications to help preparers implement the requirements.
The meeting also received an update on the Basel Committee on Banking Supervision’s proposals on accounting for ECLs.
For each issue submitted, the IASB will consider what action – if any – is required. The ITG’s next meeting is planned for 11 December 2015.
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The purpose of the ITG is to:
The ITG does not have standard-setting authority, and its purpose is to advise the IASB.
ITG members include representatives from banks and audit firms. Certain IASB Board members and representatives from the Basel Committee and from the International Organization of Securities Commissions (IOSCO) are also observers at the meetings.
The meetings are chaired by an IASB Board member. The ITG’s agenda papers, prepared by the IASB staff, are publicly available and all meetings are held in public. Minutes of the meeting will also be made publicly available.
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