i9 Partners provides Expected Credit Loss (ECL) calculations for IFRS 9 through the use of leading tools and credit intelligence. We cover all classes of financial assets with solutions for auditors, smaller companies to large corporates, public sector entities and smaller financial institutions.
We remove the pain of IFRS 9 compliance through access to a range of world class credit models to calculate ECL’s and our network of multi-disciplinary partners. Our depth of credit, IFRS and technology skills is unique in the marketplace.
The Benefits of Our Approach
A strong automation component to ECL calculations is necessary and is more cost effective than a consulting solution.
We provide a strong ongoing value-add, through access to our suite of world-leading tools and industry templates to give businesses the insight to facilitate ongoing business improvement beyond just accounting compliance.
We work closely with your auditors and advisors and we provide results in an easily auditable format that also supports internal governance.
Questions to Consider
Why can't I do what I did last year?
The change from the incurred loss model of IAS 39 to the expected loss model of IFRS 9 is a fundamental change in accounting philosophy.
A prudent provision does not comply with IFRS 9 which requires objective valuations of expected credit losses.
Auditors, regulators and boards will require detailed and defensible compliant calculations.
Which assets does IFRS 9 cover and will it be material?
IFRS 9 specifies how an entity should classify and measure financial assets, financial liabilities, hedging contracts and guarantees. Typically these include:
- Loans – intra-group, to related or 3rd parties
- Investments and treasury assets
- Loan books (interest earning loans)
- Trade or lease receivables
- Hedging contracts
- Guarantees issued
- A company’s own listed debt
An expected loss must now be measured for guarantees and brought onto balance sheet for the first time.
Changes to receivables and loan values may impact significantly on income and newly introduced ECL calculations on certain inter-company loans may be so material that they result in technical insolvency, which should be addressed in advance of your year end and may also prevent any dividend payments.
Can I do IFRS 9 calculations myself?
Only if you have been trained in ECL and have the credit experience, time and software to do this. In many instances you will require access to data beyond that which you have in your organisation to perform valid calculations. You will also need to determine statistical correlation to past history and create forward looking projections based on macroeconomic scenarios. Different classes of assets require the application of different statistical techniques to validate and calibrate models.
This even applies to smaller companies complying with IFRS accounting.
Can my auditor do IFRS 9 calculations?
Auditors and Boards are under increased scrutiny by regulators, investors and social media to avoid conflicts of interest and objectivity between audit and other services. This means your auditor can’t just do this for you as part of the audit.
Is there a hurry?
IFRS 9 is effective for all financial years starting on or after 1 January 2018.
There is a very small skills pool that can do the necessary calculations.
Companies that wake up too late will struggle to meet their reporting deadlines or have the time to address data preparation and possible technical insolvency and dividend declaration issues. It is difficult to anticipate the impact of IFRS 9 on your balance sheet until you have calculated your ECL’s.
Does it matter if I get it wrong?
The first risk is from your audit committee and auditor. The amounts involved are potentially material and can lead to a qualified audit opinion. Even if an estimate is accepted initially by your auditor, your auditor is subject to regulation and external quality control – IFRS 9 is a major new accounting statement and is likely to draw attention. In addition to this, bankers are very familiar with IFRS 9 calculations and the credibility of your financial statements are at risk. Finally, it must be pointed out that compliance is not optional and it will be difficult to make adjustments to statements in subsequent years.