Recommendations of the IFRS Advisory Council and the Ministry of Finance
According to the official recommendations of the IASB (International Accounting Standard Board, London, Great Britain) and the Ministry of Finance of Ukraine from 2020, in order to correctly apply the requirements of IFRS, it is inadvisable to continue the mechanical application of existing models for assessing credit risk during the global pandemic.
Changes in economic conditions should be reflected in the business processes of enterprises, and therefore it is logical that they should be taken into account in financial planning, risk management and strategy development for future business operations in general.
(!) Companies are advised to adjust their approach to estimating expected credit losses at least once in every three months.
Business actions during the pandemic
Taking into account the recommendations of the IASB, as well as the negative impact of the global pandemic Covid-19 on the activities of public and private enterprises, the increased unemployment, currency fluctuations, reduced solvency of both businesses and individuals,
(!) It is critically important for businesses to:
- make necessary reevaluations of their contracts;
- re-analyze and review their counterparties (borrowers);
- evaluate the probability of their counterparties (borrowers) to discharge their obligations;
- develop and approve risk management mechanisms and the methodology for accounting for expected credit losses using IFRS 9 “Financial Instruments”.