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We are doing the audit for the year ended 31.12.2021.
Company A has bank balance in one bank EUR 160,000.
The specific bank's credit rating for 2021 was Baaa . Where i can find what is the default rate related to this credit rating in order to calculate ECL as at 31.12.2021?

What I am looking basically is the Propability of Default in order to apply calculation for ECL.

Hi!

IFRS 9 computes the ECL based on the contractual lifetime (IFRS 9.5.5.19 and IFRS 9.B5.5.38). Do you have restrictions on when you can withdraw funds? If not, then the de facto contractual duration is something like 1 day, so we are talking about the PD for instant bank default, which should be so small that it is immaterial. This rule's only exception is when revolving credit lines are extended (IFRS 9 5.5.20), but that is not in scope here.

Hi . Thanks. No there are no restrictions.
But i believe i have to recognise ECL on the bank balance because is over EUR 100,000 .
So i took the credit rating of the specific bank by Moodys. (Baaa)
And i am trying to find what is the PD(propability of default related to this credit rating)
Is there any site where i can find this information?

Hi!

Thank you for the additional information. My point is that with only 1 day or similar due to the possibility to withdraw, the ECL will be more or less immaterial since the PD will be so low. As an example, I found 1-year average default rate for Baa to be 0.18 % here : (https://www.moodys.com/sites/products/D ... 426807.pdf). Converting it to a 1-day default rate assuming constant underlying hazard (probably quite a conservative assumption in this case) gives PD(1 day) = 1 - EXP(LN(1 - 0.18%)/365) = 0.000494 %. Assuming 100 % LGD (again, conservative) and EAD = 160 000 EUR, gives ECL = PD * EAD * LGD = 0.80 EUR, so the ECL is immaterial as long as we can assume free withdrawal. The ECL will only matter once there is a contractual restriction on withdrawal.

Ok got it!!Thanks

Where i can find the same table (with default rates) for 2021?

Also came up here, for completeness... viewtopic.php?f=4&t=1026

Thank you JRSB, I completely forgot about this