AERO SERVICES CREDIT UNION CO-OPERATIVE SOCIETY LIMITED · IFRS 9 impacts entire operations of ASCU...
Transcript of AERO SERVICES CREDIT UNION CO-OPERATIVE SOCIETY LIMITED · IFRS 9 impacts entire operations of ASCU...
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AERO SERVICES CREDIT UNION CO-OPERATIVE
SOCIETY LIMITED
IFRS 9 –
FINANCIAL
INSTRUMENTS
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WHAT IS IFRS 9? IFRS 9 is the International Financial
Reporting Standard that governs the
classification and measurement of
financial instruments
IFRS 9 became mandatory January 1,
2018
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ASCU’s Financial Instruments refer to our loans and
investments ($255,257,011) which represent 88% of our
Total Assets ($290,954,413)
48%
40%
6%
4% 2%0%
TOTAL ASSETS
LOANS
INVESTMENTS
FIXED ASSETS
CASH & BANK
RECEIVABLES
INVENTORY
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OLD VS NEW MODELS
• OLD MODEL
o Recognize loss only on default
• IFRS9 MODEL
o Must provide for loss upfront. As soon as loan is granted
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THREE STAGE PROCESS
• STAGE 1
o Loan is granted. Must set up provision for 12 months’ losses
o Set up provision for 12 months based on probability formula
• STAGE 2
o If loan actually defaults (31 days and over)
o Provision also based on probability; provision for lifetime balance of the
loan
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THREE STAGE PROCESS
• STAGE 3
oWhere loan is not recoverable, a higher probability is
assigned for provision of loss
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HOW DOES IFRS 9 AFFECT ASCU?
IFRS 9 impacts entire operations of ASCU
There will be a change in systems/processes for data
gathering
Increased risk profiling of members and loans
There will be provisioning for ALL loans
• Twelve (12) months for new and existing loans
• Lifetime provision for loans in default >30days
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LOAN
DELINQUENCY
AGE
DELINQUENT
LOAN BAL
EXPECTED
PROVISION
STAGE
1 – 30 DAYS $1,741,569 $540,560 1 – 12 MONTHS
31 - 9999 $10,070,324 $10,070,324 2 – 3 LIFETIME
TOTAL $11,811,893 $10,160,884
A GLIMPSE AT THE IMPACT ON
PROVISIONING
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WHAT DOES IFRS 9 MEAN TO MEMBERS?
Avoid defaulting on loans
Continuous update of members information
Likelihood of reduced surplus, dividends and rebate