This free, guided checker walks your finance team through the key decision points for IFRS 9 Expected Credit Loss Assessment. Answer a few questions to see the likely treatment and the evidence to document.
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This tool is a high-level IFRS screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
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Common scoped items include amortized-cost assets, debt FVOCI, lease receivables, contract assets, loan commitments, and financial guarantees. Items already at FVTPL and equity investments never carry an ECL allowance because fair value changes capture credit deterioration. Confirm the classification conclusion under IFRS 9.4.1.1-4.1.4 before running the impairment model.
The exposure is outside the IFRS 9.5.5.1 impairment scope; apply the measurement or impairment model of the standard that governs the item.
Official guidance: IFRS issued standards
Payment-service entities commonly apply the simplified lifetime ECL approach to merchant and service receivables using aging-based provision matrices. For receivables and contract assets with a significant financing component, and for lease receivables, IFRS 9.5.5.16 permits an accounting policy election to use lifetime ECL rather than the three-stage model. Document the election by class and apply it consistently.
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Official guidance: IFRS issued standards
Segment the population before applying historical loss rates; treat collected-but-unallocated balances separately in the matrix analysis. IFRS 9.B5.5.35 illustrates the provision matrix and contemplates different loss rates for different customer segments when loss experience differs. Test each period whether segment loss behavior has diverged enough to require re-segmentation.
Redesign segmentation around shared credit-risk characteristics per IFRS 9.B5.5.5 before applying provision-matrix loss rates.
Official guidance: IFRS issued standards
Forward-looking overlays must be reasonable and supportable without double-counting information already in historical rates. Link identified macroeconomic drivers, such as unemployment, insolvency rates, or sector volumes, to observed loss behavior and document the direction and size of each adjustment (IFRS 9.B5.5.52). The common trap is an unexplained management overlay with no documented linkage between the economic driver and the loss rate.
Measure lifetime ECL by aging band using the provision matrix adjusted for current and forecast conditions (IFRS 9.5.5.15; B5.5.35). Complete the reasonable and supportable forward-looking overlay required by IFRS 9.5.5.17(c) before finalizing the allowance.
Official guidance: IFRS issued standards
The test compares the risk of default over the remaining life at the reporting date with the risk assessed at initial recognition, using reasonable and supportable information available without undue cost or effort (IFRS 9.5.5.9). The 30-days-past-due rebuttable presumption in IFRS 9.5.5.11 can be rebutted only with documented evidence. Do not let collateral mask deterioration: collateral reduces the loss given default, not the probability of default that drives staging.
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Official guidance: IFRS issued standards
Cash at banks and related-party balances may have immaterial ECL when counterparties are investment-grade and exposures are short-term. Even so, a nil allowance is a measurement outcome that must be evidenced, not a scope exemption: document the rating source, tenor, and the loss calculation supporting immateriality. Related-party loans still require an assessment of the borrower's capacity to repay, not just intent to support.
Apply the low credit risk simplification, retain a 12-month ECL, and document the investment-grade assessment and any immateriality conclusion (IFRS 9.5.5.10). Measure a 12-month ECL for the Stage 1 exposure (IFRS 9.5.5.5).
Official guidance: IFRS issued standards
Credit impairment may be evidenced by significant financial difficulty, breach, concession, probable bankruptcy, or disappearance of an active market. The IFRS 9 Appendix A definition looks for events with a detrimental impact on estimated future cash flows that have already occurred, not merely elevated risk. Purchased or originated credit-impaired assets follow the separate credit-adjusted effective interest rate model in IFRS 9.5.5.13-14.
Measure lifetime ECL as Stage 3 and calculate interest on the amortized cost net of the allowance in subsequent periods (IFRS 9.5.5.3; 5.4.1(b)). Measure lifetime ECL as Stage 2 with interest revenue on the gross carrying amount (IFRS 9.5.5.3; 5.4.1).
Official guidance: IFRS issued standards
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