Thought leadership:

Expected Credit Losses

23 June 2017

An expected credit loss approach will depend mainly on the quality and availability of credit risk data. A lack of historical credit risk data will make application of Ind AS 109 more challenging. Entity need to develop the information system which should be capable of getting this information’s. This Standard requires classifying its financial assets portfolio into stages based on significant increase in the credit risk. Entities are required to continuously monitor credit risk and accordingly ensure proper classification of financial assets into specified stages, since accrual of interest and provisioning is directly linked with stage movement. Incorrect classification may have significant consequences.

In this publication, efforts are made to simplify all aspect involved in expected credit loss and to facilitate the implementation of ECL in a true spirit. We believe that this publication on ECL would be of real help in implementing ECL to a high standard.