Application of IFRS 9 Financial Instruments and the Exposure to Credit Risk (Case Study in Ecuador)
The COVID-19 pandemic has caused certain elements of the Financial Statements, such as accounts receivable, to show a greater indication of impairment, caused by the difficulty and possibility of insolvency of customers in the recovery of outstanding securities . This caused companies in general to...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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Yayasan Ilomata
2023-05-01
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| Series: | Ilomata International Journal of Tax and Accounting |
| Subjects: | |
| Online Access: | https://www.ilomata.org/index.php/ijtc/article/view/723 |
| Summary: | The COVID-19 pandemic has caused certain elements of the Financial Statements, such as accounts receivable, to show a greater indication of impairment, caused by the difficulty and possibility of insolvency of customers in the recovery of outstanding securities . This caused companies in general to modify the accounting treatment under the international standard IFRS 9 applicable from 2018. The objective of this article is to determine the portfolio risk that affects the calculation of these provisions, through a case study in Ecuador. To this end, a database of clients of a non-financial company was analyzed, and the composition of its portfolio segmented by day of delay, observing the component called probability of default (PD), which was determined by binary logistic regression. A model was obtained that allowed to obtain the desired probability, and consequently under the approach of IFRS 9, the calculation of the expected credit loss (ECL). The results obtained estimated a portfolio impairment of 23%, compared to the baseline scenario of 9%. |
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| ISSN: | 2714-9838 2714-9846 |