The Impact of COVID-19 on the Application of IFRS 9

Crowe Global

An impact of the economic disruption arising from Covid-19 is on the quality of accounts receivable and loans. What had until recently been low risk accounts that were collectable or being properly serviced might now be doubtful because of collapses in income, doubts about going concern, or deferral of the balance because of government action to protect business.

IFRS 9 Financial Instruments requires an Expected Credit Loss (“ECL”) calculation to be performed to determine the amount recognised in financial statements as the potential impairment to accounts receivable and loans outstanding. This is supported by disclosures required by IFRS 7 Financial Instruments Disclosures. The situation created by Covid-19 creates unforeseen challenges to the application of the IFRS 9 ECL calculation.

Crowe Global has learnt that the International Accounting Standards Board (“IASB”) is working on this problem with a view to issuing a set of FAQs to help with the application of IFRS. Visit the IASB’s website for the FAQs.