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
