IFRS 9 expected credit loss
Modifications, POCI assets, and ECL disclosures
Recognize special accounting paths where a standard model diagram is not enough.
Purpose
Flag common IFRS 9 topics that need instrument-specific analysis beyond a basic ECL calculator.
Key terms
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Key definitions
- Purchased or originated credit-impaired (POCI) assets are credit-impaired at initial recognition and have specific accounting treatment.
- A modification changes contractual cash flows and can affect derecognition, modification gain/loss, and impairment analysis.
No single formula covers all modification and POCI cases; apply the relevant IFRS 9 requirements to the instrument facts.Worked example
A loan modified after financial difficulty may require separate analysis of derecognition, revised cash flows, and whether it remains credit-impaired.
Detailed explanation
Not every exposure fits the standard three-stage teaching example. POCI assets use a credit-adjusted effective interest rate and recognize changes in lifetime expected credit losses under specific rules. Modifications, write-offs, derecognition, and assets already credit-impaired at initial recognition require separate accounting assessment.
A calculator can illustrate a defined cash-flow scenario but cannot decide the accounting classification of a contract. Maintain documentation for modification terms, original and revised cash flows, expected-life assumptions, write-off policy, overlays, and disclosure inputs. Consult the current licensed IFRS 9 text and the entity's accounting function for authoritative application.
Try a reproducible Python example
These examples use synthetic inputs and run locally in a browser worker. Edit the code, run it, and compare its output with the published example.
Runnable Python · local in your browser
Calculate year-by-year marginal and cumulative PD
Follow years 1–3 separately: conditional PD is the rate among survivors, marginal PD is the share of the original cohort defaulting in that year, and cumulative PD adds those marginal shares.
Output
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Runtime loads only after you press Run. Code runs in a separate browser worker with a 10-second limit and a 20,000-character output cap. Use synthetic examples only; browser execution is not a secure environment for secrets or sensitive records.
Runnable Python · local in your browser
Calculate survival-weighted, discounted ECL
Combine period marginal PD, LGD, EAD, discount factors, and two scenario weights in a small illustrative horizon.
Output
Run the code to see the output.
Runtime loads only after you press Run. Code runs in a separate browser worker with a 10-second limit and a 20,000-character output cap. Use synthetic examples only; browser execution is not a secure environment for secrets or sensitive records.
Assumptions
- The contract, initial-recognition status, modification terms, and entity accounting policy are reviewed by qualified accounting personnel.
Limitations
- General summaries cannot decide instrument classification or derecognition.
- Disclosure requirements depend on the standard, materiality, and reporting circumstances.
References
- IFRS 9 Financial Instruments — IFRS Foundation
- Guidance on credit risk and accounting for expected credit losses — Basel Committee on Banking Supervision
Educational material only. Methods and examples are simplified; state and validate the assumptions required for your use case.