IFRS 9 · Workpapers (Step 4 of 5)
Workpaper assignment
- Course
- Exercises
- Case studies
- Workpapers
- Exams
Impairment: stage of each instrument, significant increase in credit risk, expected loss by scenarios or by probability of default, provision matrix and reconciliation of the loss allowance: Trade receivables — matrix
Impairment of a group: provision matrix for trade receivables, stages 1 to 3 of loans and scenario-weighted loss
Section 1 of 9
Objective
Section brief
- What to document
- The engagement, its scope and the working mode chosen.
- Why
- A workpaper answers one precise question: framing it avoids off-topic work.
- How
- Read the objective and the assignment, then choose the mode (guided, semi-guided, professional).
- Expected result
- You know which question the workpaper must settle, and for which reporting date.
- Your role
- Preparer of the IFRS 9 workpaper
- Level
- Advanced
- Estimated time
- ≈ 90 min
- Progress
- 0 / 5 steps done (review excluded)
Context
Mercadia Distribution SA (fictitious entity) closes its books on 31 December 20X6. It must measure the expected credit losses of its trade receivables, of three loans at different stages (significant increase in risk, credit-impaired, return to a 12-month measurement) and of a sovereign bond. You prepare the calculations, the reconciliation of the loss allowance and the entries.
Assignment
Impairment of the trade receivables and of the three loans
Purpose of the workpaper
Describe the instrument, establish its stage (12-month, lifetime, credit-impaired) or the simplified approach, document the judgments on the significant increase in credit risk, the scenarios and the definition of default, measure the expected loss (scenarios, probability of default × loss given default × exposure, or provision matrix), compute the charge, reconcile the loss allowance and prepare the entries and the note. Rates, probabilities and forward-looking information are case data, never rules of the standard.
Questions of the file covered by this workpaper
- Which approach applies to the trade receivables and is a provision matrix acceptable?
- Compute the historical loss rate of each bucket.
- Compute the loss allowance of each bucket with the rates retained.
- Compute the total loss allowance of the matrix.
- Has loan X suffered a significant increase in credit risk? Retain the stage and justify.
- Compute the scenario-weighted expected credit loss of loan X.
- Compute the impairment charge of the year for the trade receivables and for loan X.
- Reconcile the loss allowance on the trade receivables (opening, charge, write-offs, closing).
- Is loan Y credit-impaired? What is the basis of its interest?
- Compute the net amortised cost of loan Y.
- Compute the 20X6 interest of loan Y.
- Should loan W return to a 12-month measurement?
- Compute the 12-month expected loss of loan W (exposure × probability of default × loss given default).
- Compute the amount of the reversal of the loss allowance of loan W.
- Can the Helvana bond be measured at 12 months solely because it is investment grade?
- Record the charge of the year for the trade receivables.
- Record the write-off of the Davane receivable.
- Record the charge for loan X.
- Record the interest of loan Y.
- Record the reversal of the loss allowance of loan W.
Documents in the file
Open the documents to pick out the relevant information.