The Moody’s Analytics suite of credit risk models and data, economic forecasts, advisory services, and infrastructure solutions can assist with the implementation of expected credit loss and impairment analysis, as required by IFRS 9.
The International Accounting Standards Board's (IASB) reform in accounting standards for financial instruments, IFRS 9, requires recognition of loss allowance for financial assets, based on forward-looking 12-month or lifetime expected credit losses (ECL). This standard will materially influence financial institutions' financial statements, with impairment calculations most affected.
The Moody's Analytics Credit Loss and Impairment Analysis Suite provides solutions for the most crucial aspects of the impairment calculation process. Our solutions support the different approaches taken by small and large institutions for estimating losses under IFRS 9.
Expected credit loss calculation
Institutions must enhance or develop new model processes and infrastructure to accommodate provision calculations. Moody’s Analytics expertise and tools can assist firms in determining their IFRS 9 framework and interpreting the changes required to existing probability of default (PD) and loss given default (LGD) models, ensuring consistency with stress testing, internal capital adequacy assessment process (ICAAP), and pricing models.
Firms need more historical, granular data and trend information to build forward-looking impairment models and for tracking credit risk migration. Moody’s Analytics offers the world’s most comprehensive and granular credit risk, economic, and financial datasets and produces standard and custom upside and downside macroeconomic scenarios for "forward-looking" and "probability-weighted" aspects of IFRS 9 impairment calculations.
Software to support IFRS 9 compliance
To manage the end-to-end process of expected credit loss (ECL) calculations, banks must centralize data from numerous sources, coordinate and manage a wide variety of models, evaluate changes in credit risk, and calculate expected losses and provisions accordingly. Banks also have to prepare and export data required by external accounting systems.
The Moody’s Analytics solution enables high performance for granular analysis and more accurate calculations as it is designed for multiple scenarios and what-if capabilities. The software can facilitate interaction and collaboration with flexible and visual workflow management that supports impairment analysis with a repeatable, auditable, and consistent process.
Chief International Economist
Juan M. Licari, PhD, is Chief International Economist with Moody's Analytics. As the Head of Economic and Credit Research in EMEA, APAC and Latin America, Juan and his team specialize in generating alternative macroeconomic forecasts and building econometric tools to model credit risk portfolios.
Probability-weighted lifetime forecast scenarios for IFRS9 compliance requirements.
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Moody’s Analytics Credit Loss and Impairment Analysis Suite of credit risk models and data, economic forecasts, advisory services, and infrastructure solutions assists with expected credit loss calculations.
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