IFRS 9 introduces new requirements for classifying and measuring financial assets and calculating expected credit losses (ECL). Firms face challenges in integrating the necessary data from risk and finance functions. AxiomSL's solution addresses key IFRS 9 requirements by aggregating financial and risk data, automatically classifying assets, and calculating ECL using its own or a client's model. The solution provides transparency and the ability to adjust calculations, test scenarios, and handle future IFRS changes.

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Challenges
The International Accounting Standards Board (IASB) has developed IFRS 9 to
address the shortcomings of the incumbent IAS 39 standard by mandating a
new method for applying risk metrics to accounting.
As part of IFRS 9, firms will need to analyze business model information and
the cashflow characteristics of their financial assets to determine whether the
assets should be measured at amortized cost or fair value. They will also need
to calculate the ECL for their assets over either a 12-month or lifetime period.
Firms face a major challenge to source and integrate the disparate data
required for IFRS 9. Much of the data will come from risk and finance – two
functions that have historically operated in isolation from one another,
applying different standards to the data they use. Other important data, such
as business model information, is unlikely to be held in a systematic manner
at present. Difficult decisions will also need to be made about which macro-
economic data to use and how it should be sourced.
Firms’ provisioning requirements are likely to be greater under IFRS 9 than
IAS 39, as the new standard includes a longer list of scenarios under which the
lifetime ECL must be applied. As a result, firms will want to do all they can
to mitigate their provisioning requirements, including leveraging correlations
between individual entities.
A single platform that
can be used for IFRS 9
and multiple regulatory
calculation and
reporting requirements
globally
▪
Aggregation of disparate
data, including risk and
financial data
▪
Automation of the
classification and
measurement of assets
▪
ECL calculations at both
entity and portfolio
level
▪
Scenario testing
▪
Ongoing monitoring
of changes to the
requirements and
provision of updates
International Financial
Reporting Standard 9 (IFRS 9)
AxiomSL’s solution for International Financial Reporting Standard 9 (IFRS 9)
addresses key aspects of the requirements, including the classification and
measurement of assets. It gives clients the option of leveraging a model
developed by AxiomSL’s partner, AlgoSave, to calculate expected credit loss
(ECL) at both the portfolio and entity level.
The IFRS 9 solution is built on the same platform as the other solutions
AxiomSL provides for a wide range of regulatory calculation and reporting
requirements, including International Accounting Standard 39 (IAS 39) and
Financial Reporting (FINREP) in Europe.

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©2015 AxiomSL
AxiomSL's solution
AxiomSL’s solution supports the key aspects of IFRS 9. It aggregates the necessary data, including financial,
risk and macro-economic data, and applies validation checks to ensure it conforms to high standards of data
quality. User control functionality facilitates collaboration between different functions, such as risk and
finance, and supports sound data governance practices.
Once a firm’s data has been aggregated, the solution automatically feeds it through the business rules
that AxiomSL has built to determine how individual assets should be classified. Based on the results, the
amortized cost and fair value figures are calculated.
Clients have the option of leveraging a model developed by AlgoSave to calculate a point-in-time ECL on
both an entity and portfolio basis. The AlgoSave model has been used for many years to support corporate
credit risk analysis for company valuation and debt trading. By calculating the ECL on a portfolio basis, firms
can see the correlation between entities and significantly reduce their overall provisioning requirements.
Alternatively, clients may choose to use their own ECL model or one provided by a third party.
Once the asset measurement and ECL calculations have been completed, the solution can represent the
results in accordance with the IFRS taxonomy and produce both standard IFRS and management information
(MI) reports.
The unparalleled transparency offered by AxiomSL includes the ability to drill down from the final report
values to the source data, and allows users to make manual adjustments if required. The flexibility of the
solution allows users to do scenario testing, exploring how their provisioning requirements will be impacted
by different inputs.
Together, AxiomSL and AlgoSave provide all of the business rules and calculations needed for IFRS 9. If these
are changed by the IASB, updated versions will automatically be provided to clients.
The IFRS 9 solution is built on the same platform as all of the solutions AxiomSL provides for different
regulatory calculation and reporting requirements. This ‘one platform’ approach allows clients to leverage
the data they are using for other requirements, such as FINREP. It also reduces cost and complexity because
firms do not need to maintain separate systems to comply with different requirements.