Almost one year after the application of IFRS 9, we can carry out ex-post analyzes on the "Business Model" envisaged by this principle, which came into force in January 2018 to precisely understand how to objectively identify the business model and then apply it optimally in the IFRS 9
That the banks in the process of applying IFRS 9 will face many challenges, namely, the need to strengthen coordination between the specialized units "Risk, Credit, Finance, Compliance and Information Technology", the need for integration and compatibility between financial statements and risks, Historical data necessary for modeling expected losses, and challenges of infrastructure, systems, methodologies, work manuals, risk assessment techniques, and accounting policies, which require increasing staff capabilities and skills and keeping them abreast of Banking work at the international level, as well as strengthen the role of research departments to determine the future economic scenarios in preparation for the preparation of the expected credit losses models
Dear Olga,
In my opinion there will be a difference (or not) in annual reports for 2018. I expect that the organizations will disclouse their buniness models with the measurement of financial instruments.
Best regards
Mojca
Hello Olga,
Business model under IFRS 9 indicates an entity's objectives w.r.t the dealing with financial instruments under a given course of business. In case of financial institutions, the business model is easily ascertainable. In case of others, it is to be evaluated based on the nature of ordinary business of the entity in the absence of necessary disclosures. However, where an asset is carried as FVTPL asset, we assume that involves some volatility over and above mere principal and interest,
Regards.
https://www.researchgate.net/deref/http%3A%2F%2Faustinpublishinggroup.com%2Faccounting-audit-finance-management%2Ffulltext%2Fajaafm-v1-id1003.php
Experiment Findings Non Performing Loans' Transactions, IFRS9 adoption and recap...
Specific guidance for the application of the business model test is provided undet IFRS 9, paragraph 4.1.2. A firm‘s business model reflects how it manages its financial assets in order to generate cash flows. The firm‘s business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. This assessment is performed on the basis of ‘worst case’ or ‘stress case’ scenarios that the firm reasonably expects to occur. For instance, a firm only expects it will sell a particular portfolio of financial assets in a stress case scenario then this scenario would not affect the firm’s assessment of the business model for those assets if the firm does not reasonably expect it to occur.
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