Meet the requirements of IFRS9
SPPI classification test for debt instruments
Assess whether debt instruments meet the SPPI test -“solely payments of principal and interest”
Impairment losses
The estimation of expected credit losses for individual debt instruments requires an assessment of the financial situation of the counterparty
Tool for IFRS 9 is created on the basis of MS Excel. It is easy to use and intuitive for a user. It does not require the installation of any additional software or the assistance of IT specialists. When providing the tool we also ensure user access to workshops covering the application of IFRS9 followed by the availability of further advice on an on-going basis.
Assessment of financial assets using IFRS 9 tool
- Perform SPPI test
- Determine an impairment loss allowance for trade receivables
- Estimate fair value or impairment loss allowances for loans or other debt instruments
- Estimate the difference between the fair value of minority shareholdings and their current measurement at historic cost
Perform SPPI test
- The SPPI spreadsheet contains a series of questions that assess whether a particular debt instrument e.g. a loan meets the ”solely payments of principal and interest” criteria.
- Depending on the answers given the tool determines:
- The instrument meets the test and should be measured at amortised cost;
- The test is not met. It is necessary to perform a benchmark test; or
- The test is not met. The instrument should be measured at fair value.
Determine an impairment loss allowance for trade receivables
- The tool analyses the payment history of trade receivables
- The user is only required to input basic data concerning past trade receivables
- On the basis of this data the tool calculates expected loss impairment allowances for each group of trade receivables.
Estimate fair value or impairment loss allowances for loans or other debt instruments
Fair value
- The tool determines a credit rating for the counterparty based on its financial data...
- ... and then – on the basis of the credit rating – estimates a market discount rate to be used when discounting expected cash flows from the instrument
Impairment loss allowance
- The tool assesses the credit risk of the counterparty – at initial recognition of the debt instrument and as at the balance sheet date;
- After the user provides answers to a few questions the tool allocates the debt instrument to Stage 1, Stage 2 or Stage 3.
- The tool then calculates an impairment loss allowance as at the balance sheet date
Estimate the difference between the fair value of minority shareholdings and their current measurement at historic cost
- Performs simplified multiples analysis based on industry indicators;
- Using the tool it is possible to estimate whether there is a material difference between the current measurement at historic cost and fair value
Not only for banks. Discover IFRS9 in the world of corporates.
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Partner, Capital Markets and Accounting Advisory Services, Assurance, Romania
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