CHFT Technical Lunch Talk - Recap
Upcoming Valuation Challenges in Relation to the Latest Change of IFRS 9 Financial Instruments
On 22 November, we held a CHFT Technical Lunch Talk on the above topic in Central. The speakers of the talk were our Ms. Stella LAW and Mr. Ross WANG.
IFRS 9 is the substitute of IAS 39. There are four categories under IAS 39, but only three under IFRS 9. “Loans and receivables” category have been renamed as “Amortized Cost” assets under IFRS 9, whereas “Held to maturity” category has been cancelled.
FVPL stands for “Fair value through Profit & Loss”
FVOCI stands for “Fair value through Other Comprehensive Income”
The meanings of FVPL and FVOCI are similar under both standards.
IFRS 9 established a new model for recognition and measurement of impairment. Our speaker elaborated the expected credit loss model including its scope, calculation methods and applicable situations. Practical example on trade receivables on different scenarios were illustrated and their financial impacts were well shown. In the Q&A session, the audiences questioned on how to assess the default risks of companies that do not have a credit rating. Our speakers as well as our auditor guests shared the view that tacking records are one of the common methods to assess the risks. For major liabilities, individual credit rating assessment should be carried out for the relevant companies based on their financial information.