Objectivity in financial reports is relative

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Objectivity in financial reporting is relative but we need in developoment of new standards to enhance its application and minimizing subjectivity in account balances

Will objectivity be significantly affected for ECL calculation during covid situation ?

The accounting for ECL for banks is particularly challenging given ECL accounting is designed to incorporate estimations of credit events, and their consequential cash shortfalls, based on a probability‑weighted approach. In times of heightened uncertainty these estimations become more difficult. This publication highlights the major building blocks to ECL accounting, with particular focus on the measurement of ECL under stressed economic conditions and the impact that modifications and government assistance may have.The scope requirements of ECL accounting are worth revisiting given much of the focus is on its application to loans, but the scope is far broader. The requirements also apply to debt securities (measured at amortised cost or fair value through other comprehensive income), trade receivables, contract assets under IFRS 15 Revenue from Contracts with Customers, lease receivables under IFRS 16 Leases, issued loan commitments and issued financial guarantee contracts which are not accounted under IFRS 4 Insurance Contracts and IFRS 17 Insurance Contracts.Of particular note for banks is the accounting for issued loan commitments and issued financial guarantee contracts. In periods of economic stress, corporate borrowers are increasingly likely to draw down on borrowing facilities. The issuer of the loan commitment will need to reconsider the amount of ECL given future expected drawdowns can be accompanied with an increasing probability of default as corporate borrowers use facilities to meet their short‑term liquidity needs in response to declines in output and revenues. Similarly, financial guarantee contracts that reimburse the holder of the guarantee for failure of a borrower to pay under a specified debt instrument will exhibit greater probability of default when the issuer of the debt that is guaranteed is subject to financial difficultly. All other things being equal, an increase in probability of default will typically result in an increase in the ECL.