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This is not really my area of expertise, but it sort of looks a bit like a barter transaction as described here. Maybe this can be of help:
https://www.cpdbox.com/012-barter-transactions-ifrs/

Great to hear it was of use. The whole case is very interesting as a case example on audit - firm interactions and well worth the study.

Thank you Marek for the assist on the debits and credits

1. The requirement is that ECL is created at reporting period. In practice however for internal management accounting, it is standard (at least in all three banks I have worked) to create the ECL at each month end. In theory, if you measured the balance sheet even more often, you would create it eve...

I would probably argue that the moment basic ECL model condition on delinquency status or similar, that is one coverage ratio (ECL / gross carrying amount) if on-time and one if delinquent. This would make it possible to reflect some form of credit quality, and also provide useful information if alo...

In general, one should be quite careful in using these sort of "blanket" provision proportions (see here for an even more extreme example: https://www.canadian-accountant.com/content/profession/pcaob-censures-ernst-young-canada-partner) My recommendation is always to start from your actual...

A short mention about the rationale for the FVOCI treatment is that we handle it in the PnL as if it was amortized cost, and in the balance sheet as if FVPL. The idea is to not "pollute" the PnL with volatility that does not give interesting information, but still reflect the correct value...

Out of interest DJP, just to understand, what is the argument for that the consent fee is not a transaction cost? This is probably more due to me not being very knowledgeable about bond trading conditions (due to being mostly in the retail lending space).

Thank you for the input DJP. First and foremost a bit of oversight from me to not ask for the accounting treatment, I wrote it based on the assumption of being Amortized Cost, but yes, with FVTPL is very different, thank you for bringing this up. Second error is clearly on me, read "constant&qu...

1) Strictly speaking, you are supposed to include this fee in your cash flow forecast, use it to compute a new EIR, and then use that over the lifetime of the bond. 2) If there was reasonable information in advance that this could happen, you should include it in the EIR calculation. When it happens...

It would help to get a little more context on the specific transaction here. 1) Is what is going on that you each month receive a constant fee 2k in perpetuity or is there some limitation? In both cases, you are then dealing with an annuity. What you do initially, is to compute the effective interes...

Hi! I agree that at the initial state, the loan is really a liability, and will swap around to an asset when the lender has fulfilled their obligation to disbursed the loan. I would say that this faithfully represent the financials of the situation, the lender was paid for a future service, so there...

Hi!

It depends on whether there is some collateral or for example, you selling non-performing assets of (which realize recovery earlier). Basically, what we typically do for assets is to forecast at each point in time the probability for default, and then one can compute the direct consequences.

Unsure on the policy part, but you do not need to apply it retrospective, see here:
https://ifrscommunity.com/knowledge-bas ... n-criteria

It is worth mentioning that reclassifications should be a very rare event. Out of interest, what is the reason to reclassify?

Yes, I think this should be the case, but limited experience of the entries myself, so probably someone else can confirm that. Thank you for clarifying about the example. One thing which is worth to point out when we talk about current / non-current is that the ECL can often lead to a shift in timin...

Hi! It is fine to keep the loan at amortized cost, but you need to divide it into a loan part (based on the 12 % rate if that is the applicable market rate for corresponding lending) and an investment of the company into the related party, see here: https://ifrscommunity.com/knowledge-base/interest-...

Hi! Not sure I understand the question, you have shown the ECL contributions for each of the contractual payments, are these not what you can allocate to current and non-current? Out of interest, how did you get the expected cash shortfall 120? Naively, I would have expected that the shortfall reduc...

When you buy the bond, the initial fair value (which typically will be what you buy the bond for) is the principal (see IFRS 9 4.1.3a). If company A sells the bond to company B, it means in simplified terms that accrued interest for company A becomes principal in the accounting for company B.

I think the key is what you find in the EY article: "Cash and cash equivalents, such as current accounts that are classified as financial assets measured at amortised cost, are also subject to the general approach. However, due to the fact that a current account is on demand, 12-month and lifet...

Apart from the great information here, the articles written at CPD box is often quite interesting and gives a lot of good examples on how to understand IFRS:
https://www.cpdbox.com/

I would agree with this assessment since company B can always do what is most economically preferential.

I am not fully certain on the exact entires, but the idea is that you split the loan below market rate into a loan at market rate and a capital injection from the parent. The payments each year from the subsidiary are then payments on the market rate loan. In your case, a rough estimate is that the ...

Paragraph B5.5.41 answers on how to estimate ECL when there is no historical losses: "The purpose of estimating expected credit losses is neither to estimate a worst-case scenario nor to estimate the best-case scenario. Instead, an estimate of expected credit losses shall always reflect the pos...

Agree with Marek. If the customer most of the time just pay back the loan on a closer time then 3y, then you can just add it to the balance and adjust the effective interest rate. It becomes more tricky if customers tend to pay back some of it. In such a case one should strictly speaking looking at ...

Hi! Thank you for the clarification. However, maybe the question I raised as well was not formulated clearly. You talk about "extra interest" from 4M going to A. My question is how this extra interest is determined. A customer C in the 4 M portfolio will each month make a payment. Part of ...

How does the interest skim work in practice. Let say that the customer pays 1000 CU, of which 900 are paying back principal. Do Bank A has the right to a pro-rata share of the 100 CU in interest (based on the difference between 8.25 % and 8.1 %)?

Hi!

Good question. The way I have interpreted the framework is that you need to adjust the expectation for the cash flow monthly based on expectations, which gives rise to a modification change in PnL.

BDO Australia has a good summary about fees and IFRS 9: https://www.bdo.com.au/en-au/accounting-news/accounting-news-september-2019/fees-charged-to-customers-by-lenders I agree with their assessment that one should include the revised cash flows due to overdue interest. However, I would argue that d...

Hi! For calculating the modification, one use the orginal discount rate (see IFRS 9.B3.3.6). The logic is that if you did not change the cash flows in a way that change the present value with current EIR, there is not really any modification gain / loss. I based the carrying amount on that you wrote...