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
File of a group: classification, measurement, impairment and derecognition of financial instruments (IFRS 9)
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
- Expert
- Estimated time
- ≈ 90 min
- Progress
- 0 / 5 steps done (review excluded)
Context
Brenvane Group SA (fictitious entity) closes its consolidated accounts on 31 December 20X6. In 20X6 it acquired a convertible bond, granted a loan with an arrangement fee, acquired a zero-coupon bond at FVOCI, recorded the deterioration of a loan, sold loans to a fund with restrictions and renegotiated a bank loan. The preparer builds the file on financial instruments, submitted to a reviewer. Teaching simulation: the review trail of the file (preparation, reviewer notes and final sign-off) is simulated for demonstration purposes; it is neither a real review nor a validation of the content.
Assignment
Impairment of the trade receivables and of loan M
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 what are the inputs of the provision matrix?
- Compute the historical loss rate of each bucket.
- Compute the loss allowance of each bucket.
- Compute the total loss allowance of the matrix.
- Has loan M suffered a significant increase in credit risk? Which information was missing and how did you obtain it?
- Compute the expected loss of loan M (exposure × probability of default × loss given default).
- Compute the impairment charge on the trade receivables and on loan M.
- Record the charge to the loss allowance on the trade receivables.
- Record the charge to the loss allowance of loan M.
Documents in the file
Open the documents to pick out the relevant information.