Paragraph 2.1(b)(i) of IFRS 9 notes that operating lease receivables are subject to the derecognition requirements of IFRS 9. For each time bucket, the historical loss rate can be determined by dividing the ultimate loss (of CU300) by the amounts outstanding in that time bucket, as illustrated below: Step 5: Adjust the loss rate for current and forward-looking information. » Financial instruments

2.6 - Fair value measurement of non-financial assets and liabilities, 3.1 - Classification and measurement of financial assets under IFRS 9 An example would be a government requiring that payment holidays are granted to an entire class of loans (for example all home mortgages) without regard to the borrower’s individual financial circumstances. an entity should consider whether executory contracts have become onerous.

» Leases The policy chosen should be consistently applied and disclosed where material. Many groups have undertaken large-scale scenario planning exercises, given the on-going impact of COVID-19, but those planning exercises might have been focused at a trading profit level, and they might not have taken into account all of the factors that need to be considered to determine taxable profits by geography. This mixed approach might be taken in practice because the credit spread is often observable, or it can be derived based on credit ratings and comparison to other similarly rated instruments. It is therefore expected that there will be some forward-looking information related to COVID-19 that can, and should, be judged as reasonable and supportable and therefore included in the assessment of both staging/SICR and measurement of ECL. Management should reconsider the following assumptions at an interim reporting date, to determine whether there has been a material change for which the DBO should be adjusted: The impact on the net defined benefit liability will vary depending on the specific facts and circumstances of each entity. [IAS 16 para 62]. » By industry In the contract with the customer (in this situation, a tour operator), entity A earns a fee unless the traveller does not start the journey – for example, the traveller cancels the travel contract in specific situations or is not able to start the journey due to other circumstances (including force majeure). In particular, additional disclosures about liquidity risk might be needed where the virus has affected an entity's normal levels of cash inflows from operations or its ability to access cash in other ways, such as from factoring receivables or supplier finance. Since no amendment is made to the loan agreement, it might be questioned whether or not this is a modification for the purposes of IFRS 9, and this could depend on the specific facts and circumstances. Click here for an index of FAQs by accounting standard. The general requirement to operate in certain regions or industry sectors in order to qualify for the government assistance constitutes such a condition in accordance with IAS 20.03. The conclusion will therefore depend on the assessment of the last two indicators, where judgement should be applied.
Loans might no longer be classified as part of the net investment because of a change in the likelihood of repayment, but they might not be immediately repaid. FAQ 3.3.1 – How do floors in variable-rate loans affect the application of cash flow hedge accounting (IFRS 9)? The following scenarios use the above guidance and principles in assessing whether the reliefs and measures are government grants.

The loan has a remaining maturity of five years as at the date when the deferral is granted. The question that an entity should ask when making this judgement is whether, at the reporting date, it was known or knowable that COVID-19 could materially impact the measurement of assets and liabilities. In this FAQ, it is assumed that, based on an analysis as set out above, management determines that this expected loss rate is CU400. This would result in higher fixed costs capitalised in the cost of inventory.

FAQ 4.9 – Lessor accounting for initial direct costs where an operating lease is modified Only those losses that are due to credit risk are within the scope of the ECL. » Illustrative text, In depth and Practical guides

Note that, in the event that a lessor voluntarily forgives amounts contractually due for past rent, a policy choice exists as to whether the derecognition guidance in IFRS 9 or the lease modification guidance in IFRS 16 is applied (see further FAQ 4.8). Hedging instrument: Interest rate swap whose critical terms perfectly matched the pre-modification loan and for which the terms remain unchanged. The objective of IFRS 9 ECL is to reflect an unbiased estimate of expected credit losses. PWC Philadelphia: Planning Your Financial Future Workshop, Issues & Impacts – Southern New England Health Care, PWC NJ: Making Strides Against Breast Cancer Walk, PWC Philadelphia: Prospective Member Breakfast. This mismatch in the timing of the cash flows would likely not be significant enough to cause the relationship to fail the highly effective (80–125% effectiveness) test, but it would result in some ineffectiveness being recognised (subject to the usual ‘lower of’ test).

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