last updated: 1/20/2019

IFRS 9 example: illustrative calculation of lifetime ECL and 12-month ECL for a loan

Below are calculations accompanying the example available on IFRScommunity.com under direct link below:

https://ifrscommunity.com/knowledge-base/ifrs-9-impairment/#link-ifrs_9_example_12_month_ECL_vs_lifetime_ECL_illustra

On IFRScommunity.com, years are written as 20X1, 20X2 etc., but this changes to 2001, 2002 etc. whenever a spreadsheet form
Hence this example starts in 2001, but is NOT outdated at all :)

Cash flows of the loan: reporting date

12/31/2001
12/31/2001 (100,000) 12/31/2002
12/31/2002 25,000 12/31/2003
12/31/2003 25,000 12/31/2004
12/31/2004 25,000 12/31/2005
12/31/2005 25,000
12/31/2006 25,000

EIR 7.9%

Schedule for amortised cost

opening closing
balance balance
year 1 Jan interest in P/L cash flow 31 Dec
2002 100,000 7,926 (25,000) 82,926
2003 82,926 6,573 (25,000) 64,500
2004 64,500 5,127 (25,000) 44,627
2005 44,627 3,537 (25,000) 23,164
2006 23,164 1,836 (25,000) (0)
rect link below:

nth_ECL_vs_lifetime_ECL_illustration_01

etc. whenever a spreadsheet formula needs a valid format date as an input.

PD
EAD (marginal) PD (cumulative) LGD EIR Marginal ECL
100,000 3% 3% 80% 7.9% 2,224
82,926 3% 6% 80% 7.9% 1,709
64,500 3% 9% 80% 7.9% 1,231
44,627 4% 13% 80% 7.9% 1,053
23,164 4% 17% 80% 7.9% 506

2,224 12 month ECL (discounted)

6,722 lifetime ECL (discounted)
Long term receivable 1,000
Expected to be paid 10
Discount rate 7.5%

Scenario Payment Credit loss Probability Expected Loss Period

1 1,000 - 80% - 10
2 700 300 10% 30 10
3 400 600 10% 60 10
Total 100% 90
Discount Rate Impairment
7.5% -
7.5% 15
7.5% 29
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