IAS 37 Loan commitments
IAS 37 Loan commitments
I have a commitment to grant a loan. The commitment results from the contract. The customer can decide to take the loan within 2 months of signing the initial contract. If the customer decides to take out a loan, I have to grant the loan. The probability that the customer will benefit from the loan is over 50%. Should there be recognised provision for such a loan commitment? If so, what should be included on the debit side: cost? asset? Should an off-balance sheet liability be recognized?
Re: IAS 37 Loan commitments
Hi, I think that the only “provision” results from expected credit losses (ECL) under IFRS 9. The provision under IAS 37 should be recognised only if the contract with customer becomes onerous, but in most cases I think that ECL provision should be enough. ECL are recognised as an expense.
Off-balance sheet liability is simply a disclosure, and yes - have a look at IFRS 7:)
Have you looked at financial statements of banks? Loan commitments are a significant position there, so you’ll bound to find lots of useful information and best practice there.
Off-balance sheet liability is simply a disclosure, and yes - have a look at IFRS 7:)
Have you looked at financial statements of banks? Loan commitments are a significant position there, so you’ll bound to find lots of useful information and best practice there.