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Company Confidential - For Internal Use Only
Copyright © 2015, SAS Insti tute Inc. Al l r ights reserved. 11
THE EXPECTED CREDIT LOSS IMPAIRMENT APPROACH9 IFRS 9 CHALLENGES
More Data - New credit and macroeconomic information has to be collected and continuously reviewed.
More Models - The relevant factors (PD,LGD,EAD) for the ECL calculations have to be estimated based not
only on the historical information but also considering the expected macroeconomic and credit developments
More Complicated Calculations - All this new information has to be processed together with the estimates of
the relevant ECL factors in order to derive the ECL impairment amounts (e.g. staging, discounting)
More Impairments - The ECL calculations / booking have to be performed for all fin. instruments
More Often - The ECL calculations have to be updated when the macroeconomic expectations and / or credit
quality of an fin. instrument change
More Financial Impact - The ECL based impairments under IFRS 9 will result into a negative Day 1 impact on
firm’s Balance Sheet and P/L and will lead to higher volatility in the future
More Interpretations - The high-level IFRS 9 requirements have to be interpreted during the implementation
and assumptions have to be taken (e.g. Staging, grouping). In order to achieve optimal compliance, each of the
available options should be assessed for impact on company’s financials but also on it’s robustness and
acceptability by the auditor. In the end, option with the desired balance between the two, should be chosen.
More Governance and Controls - The whole end–to-end process covering all the above has to be performed in
a robust environment with sufficient controls in place in order to satisfy the requirements of the auditor.
More Internal Cooperation - Various units (Risk & Finance) and competencies will need to work more closely
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