COVID-19 is an indicator of impairment of assets. In IFRS the measurement of impairment depends on the type of asset and hence various standards are relevant. Review the standards that apply and how impairment is measured under each of them.

2. The material for this course has been prepared for the benefit of the
delegates. It does not necessarily stand on its own and no
responsibility for loss occasioned by any person acting or not acting as
a result of this material can be accepted by the presenter(s).
These materials are intended for IFRS Update session only, do not
constitute advice and should not be used for the purpose of advising
clients.
The words and opinions expressed during this presentation and on the
slides are strictly views of the presenters and not those of their present
or past employers.
© Square Mile Global Consulting Limited, London
2

3. IFRS
IPSAS
3
Blockchain
Cybersecurity
Data Analytics
21st Century
Management
Programme
Saket Modi, CFA
▪ Facilitated IFRS workshops for preparers and users of financial statements from over 50
countries in Europe, Africa, Middle East and Asia
▪ Previously worked with Lloyds Bank and Ernst & Young
Homiyar Wykes, ACA (ICAI)
▪ London-based with over 25 years of experience across the Big 4 accounting firms and
various industries
▪ Extensive IFRS and US GAAP experience internationally in industries such as
commodities, transportation, logistics, metals and mining

4. 4
Global financial reporting language
(140+ Countries)
ComparabilityTransparency
Helps users make informed economic decisions

5. 5

6. 6
Measurement
of Assets
and
Liabilities
Demand
(revenue,
contract
fulfilment)
Supply
chain
(disruption,
impairment)

7. Cost
Net realisable
value
Revised carrying value
7
Lower of
▪ Drop in market prices
▪ Obsolete inventory
If Net realisable value < Cost, impairment loss is recognised in the income
statement

8. Existing
carrying
value
Recoverable
amount
Revised carrying value
8
Lower of
Fair value
less costs of
disposal
Value in use
Higher of
COVID-19 is an indicator of impairment
▪ Active market?
▪ Reduced cash flows?

9. 9

10. 10

11. 11

12. Is there a significant increase in credit risk since origination due to
coronavirus?
▪ If yes, lifetime ECL is required
12
ECL provisioning is a forward looking approach so requires
assumptions and estimates around the collection of cash flows
Expected credit loss
=
Exposure at default x Loss given default x Probability of default

13. ▪ IFRS 9 requires entities to adjust their approach to determining
ECL in different circumstances
- Entities should not continue to apply existing ECL methodology
mechanically
- Extension of payment holidays to all borrowers in particular classes of
financial instruments should not automatically result in all those instruments
being considered to have suffered significant increase in credit risk
▪ Reflect changes in economic conditions in macroeconomic
scenarios applied by entities and in their weightings
- Post model overlays or adjustments may be required
▪ In the current stressed environment, IFRS 9 and the associated
disclosures can provide much needed transparency to users of
financial statements
▪ Consider prudential and securities regulators guidance
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https://smglobal.co.uk/training-solutions/
info@smglobal.co.uk
Saket Modi
Director
Square Mile Global Consulting
https://www.linkedin.com/in/saketmodi/