Requirements under the new HKFRS 9 on Expected Credit Loss:

  • Most Financial Instruments are subject to Expected Credit Loss Assessments under HKFRS 9.
  • ECL typically covers trade receivable, contract assets, loan and other receivables.
  • A Simplified Approach for trade receivable based on a Provision Matrix of Lifetime ECL.
  • A 3-Stage General Approach for loan and other receivables, and as a policy choice for trade and lease receivables with significant financing component.
  • Forward looking economic scenarios and their impacts on a weighted average ECL.

Our Technical Experiences on Credit Loss Analytics:

  • Forward-looking adjustments under potential macro-economic scenarios
  • Industry-based, counterparty-based credit ratings and empirical probability of default
  • Regression analyses on economy-wide default rates against macro-economic drivers
  • Company’s historical default and credit loss rate analyses across its receivable’s aging schedule
  • Risk groupings, staging and transfers, 12-month and lifetime credit losses
  • Benchmarking the concluded loss provision rates against other HKFRS 9 and HKAS 39 preparers

Full Document on HKFRS 9