Maximum period of exposure

Learning objectives

• Determine the maximum period over which expected credit losses are measured (maximum contractual period, including the borrower's extension options).L3, L4
• Support in writing, from the facts of the case, the judgement made on the maximum period of exposure.L3, L4

Normative references

• IFRS 9 §5.5.19The maximum period to consider when measuring expected credit losses is the maximum contractual period, including extension options, over which the entity is exposed to credit risk, and not a longer period, even if that longer period is consistent with business practice; the exception for some revolving facilities is set out in para. 5.5.20.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

1 question

• Ciel SA has granted a customer a 3-year loan, with an option, at the borrower's discretion, to extend the contract by 2 years. In practice, Ciel renews loans of this type for 8 years. Over what maximum period should the expected credit losses be measured?L3