The September 2015, Issue 2 of KPMG ISG’s IFRS Newsletter: IFRS 9 Impairment – ITG Tackles Some Difficult Areas of Judgement summarizes the September discussions of the IASB’s IFRS Transition Resource Group for Impairment of Financial Instruments. At that meeting, the ITG discussed issues submitted by stakeholders about the new expected credit loss model for financial instruments under IFRS 9, Financial Instruments. Generally, the ITG appeared to agree on the issues discussed, including that:
- Internal credit risk ratings may be a valuable tool in applying IFRS 9;
- A single absolute threshold could not be used to identify significant increases in credit risk for loans that did not have similar credit risk at initial recognition;
- Behavioral indicators may be an ingredient to assessing significant increases in credit risk; and
- Using changes in the 12-month probability of default to asess whether credit risk has increased significantly requires an appropriate level of analysis.
The IASB will consider what action is required for each issue that stakeholders submit for consideration. The ITG’s next meeting is planned for December 11. The deadline to submit issues for discussion is October 21.