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  • HOW IMPLEMENTATION OF IFRS 9 IN CONTEXT OF COVID-19
Publication:

HOW IMPLEMENTATION OF IFRS 9 IN CONTEXT OF COVID-19

28 April 2020

The initial implementation of IFRS 9 in Indonesia began on January 1, 2020. With the COVID-19 outbreak that struck Indonesia in March 2020, the Institute of Indonesia Chartered Accountants (IAI), explained the influence of the pandemic in the initial adoption of IFRS 9 in Indonesia.

COVID-19 can impact the ability of borrowers, whether corporate or individuals, to meet their obligations under loan relationships. Individual and corporate borrowers may have a particular exposure to the economic impacts in their geography and industry sector. More broadly, reductions in forecasts in economic growth increase the probability of default across many borrowers and loss given default rates may increase due to the fall in value of collateral evident more generally by falls in prices of assets.

Applying IFRS 9 Financial Instruments, an entity should measure ECL in a way that reflects

An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;

The time value of money; and

Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

Based on standards, Entities are required to develop estimates based on the best available information about past events, current conditions and forecasts of economic conditions. In assessing forecast conditions, consideration should be given both to the effects of COVID-19 and the significant government support measures being undertaken.

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