IDEAS home Printed from https://ideas.repec.org/h/wsi/wschap/9789811269943_0044.html
   My bibliography  Save this book chapter

Expected Credit Losses under IFRS 9: Concept, Models, and Disclosures

In: Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives In 4 Volumes

Author

Listed:
  • Alessandra Allini
  • Bikki Jaggi
  • Annamaria Zampella
  • Martina Prisco

Abstract

The IFRS 9 on Financial Instruments has made an important contribution to the credit loss recognition process and financial reporting by replacing the existing Incurred Credit Loss (ICL) model with the Expected Credit Losses (ECL) model. The ECL model applies to all financial instruments whether they are recognized at the amortized cost or at fair value. Firms are required to estimate and recognize loan loss allowances based either on the 12-month or lifetime ECL, depending on whether there has been a significant increase in the credit risk since initial recognition. In this chapter, we first briefly explain the scope of IFRS 9 and then discuss the main characteristics of ECL model and also present mathematical models that can be used to estimate credit loan losses. The mathematical models can be based either on the capital market, discounted cash flow, or weighted losses approach. Finally, we discuss ECL disclosures that are expected to provide greater transparency on credit risk and loan loss provisions, and also present economic implications of the ECL model on firm performance.

Suggested Citation

  • Alessandra Allini & Bikki Jaggi & Annamaria Zampella & Martina Prisco, 2024. "Expected Credit Losses under IFRS 9: Concept, Models, and Disclosures," World Scientific Book Chapters, in: Cheng Few Lee & Alice C Lee & John C Lee (ed.), Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives In 4 Volumes, chapter 44, pages 1461-1511, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811269943_0044
    as

    Download full text from publisher

    File URL: https://www.worldscientific.com/doi/pdf/10.1142/9789811269943_0044
    Download Restriction: Ebook Access is available upon purchase.
    File URL: https://www.worldscientific.com/doi/abs/10.1142/9789811269943_0044
    Download Restriction: Ebook Access is available upon purchase.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Financial Accounting; Financial Auditing; Mutual Funds; Hedge Funds; Asset Pricing; Options; Portfolio Analysis; Risk Management; Investment Analysis; Momentum Analysis; Behavior Analysis; Futures; Index Futures; CDCs; Financial Econometrics; Statistics; Financial Derivatives; Financial Accounting;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G1 - Financial Economics - - General Financial Markets
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • G3 - Financial Economics - - Corporate Finance and Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:wschap:9789811269943_0044. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscientific.com/page/worldscibooks .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.