IFRS 9 and expected credit loss calculation under COVID-19 pandemic

Credit holidays, moratoria, grace periods, difficulties with installment payments, uncertainty of forward-looking situation – how to deal with the calculation of the expected credit loss (ECL) of financial instruments and particularly loans in the scope of IFRS 9 during COVID-19 pandemic and how the above-mentioned factors impact ECL and methodologies adopted for the calculation of the latter?

IFRS 9 incorporated subjectivism to a large extent and requires application of many judgments. It does not provide standard or precise guidance and criteria to be applied for the calculation of ECL either and an exact approach of lifetime losses determination and the application of forward-looking scenarios.

In this publication Grant Thornton Armenia presents some recommendations, which are in line with recently circulated European Banking Authorities guidance to banks, European Securities and Markets Authority statement and the IASB statement.