IFRS 9, Credit & Collection Analytics
IFRS 9 for Small, Medium and Large companies
Lux Actuaries assists with the application of the new requirements for financial instruments under IFRS 9 which covers the classification and measurement of financial instruments, impairments and hedge accounting. Under IFRS 9, a principles-based approach is used to classify financial instruments and determine how these should be measured on an ongoing basis e.g. at amortised cost, fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVTPL). IFRS 9 also introduces new requirements for impairments of financial assets using an expected credit loss (ECL) model instead of the incurred loss model required under IAS 39. Under the new standard, entities must allow for future losses, even if no loss event has yet occurred. This involves calculating an unbiased, probability-weighted estimate of expected credit losses under a range of scenarios while incorporating reasonable and supportable information on past events as well as current and future macroeconomic conditions. A simplified approach is used for certain assets including trade receivables where there is no significant financing component.
We assist with:
- calculating provisions for expected credit losses (under general and simplified approach)
- development of models used for estimating ECL (PD, LGD, EAD models)
- independent verification and validation of models used to estimate ECL
- valuation of financial instruments subject to measurement at fair value (e.g. unlisted equity investments)
To summarise, we perform the necessary calculations, together with your input and historical data, that you require to comply with the new standard and then deliver our actuarial report, setting out the disclosures you need under IFRS 9, in an appropriate accounting format, for your immediate and easy use.
We provide 360-degree support in resolving the queries of your auditors, in relation to our valuation and assumptions.
This is a quick and painless and professional way of taking care of your IFRS 9 burden, by professionals who are trained to consider probabilities of credit default.
Please contact Mr Ernest Louw FASSA at firstname.lastname@example.org for an easy discussion, and if you request, a no-obligation quote for the delivery of the actuarial report.
Your Service Professionals
Ernest Louw (GCC and Europe) and Kathya Ledesma (Mexico) offer the Credit Rating and Collections Strategies service offering at Lux.
A quantitative process that ranks customers in terms of the likelihood of occurrence of a specific event. Scorecards, combined with other business strategies such as expected approval rates, profit, collection and losses, are used as a basis for the decision-making.
These strategies assist to identify the most profitable clients and develop a strategy to encourage their loyalty and maximize their activities with the organization.
We design robust policies, which allow companies to take stronger control of the approval of loans process, setting minimum requirements such as income and credit bureau ranking. These policies form a critical component of companies’ internal control processes for regulatory compliance.
Collection, or ‘Champion and Challenge’ Strategies
We help companies achieve target levels of collection success in terms of both profits and costs incurred. We design collection initiatives that improve profitability, service and cash collected whilst reducing operational costs. In addition, these strategies identify clients by their probability of default and test alternative collection treatments.
We help to reduce companies’ losses by designing customized payment solutions for their clients, for example loan restructuring products or settlement agreements.
We develop a selling strategy to identify and evaluate a segment of a portfolio and propose a selling price according to desired objectives.