IFRS 7 disclosure requirements for credit risk and ECL
IFRS 7 Financial Instruments: Disclosures sets out the disclosure requirements that complement IFRS 9. The objective is to provide information that enables users to evaluate:
A reconciliation from the opening to closing balance of the loss allowance, showing separately changes for each stage.
| Movement | Stage 1 | Stage 2 | Stage 3 | Total |
|---|---|---|---|---|
| Opening Balance | $2,500 | $4,200 | $8,100 | $14,800 |
| Transfer to Stage 1 | +$800 | -$600 | -$200 | - |
| Transfer to Stage 2 | -$400 | +$650 | -$250 | - |
| Transfer to Stage 3 | -$150 | -$500 | +$650 | - |
| Net remeasurement | +$180 | +$420 | +$850 | $1,450 |
| New originations | +$320 | +$50 | - | $370 |
| Derecognitions | -$200 | -$180 | -$350 | -$730 |
| Write-offs | - | - | -$1,200 | -$1,200 |
| Recoveries | - | - | +$150 | +$150 |
| Closing Balance | $3,050 | $4,040 | $7,750 | $14,840 |
Analysis of gross carrying amounts by stage, showing how exposures move between stages.
| Stage | Opening | Transfers In | Transfers Out | Other Changes | Closing |
|---|---|---|---|---|---|
| Stage 1 | $850,000 | +$45,000 | -$38,000 | +$12,000 | $869,000 |
| Stage 2 | $120,000 | +$28,000 | -$32,000 | -$5,000 | $111,000 |
| Stage 3 | $30,000 | +$10,000 | -$13,000 | -$7,000 | $20,000 |
| Total | $1,000,000 | - | - | - | $1,000,000 |
0.35%
$3,050 / $869,0003.64%
$4,040 / $111,00038.75%
$7,750 / $20,000Disclosure of how ECL would change under different scenarios and key assumptions.
| Scenario | Probability | ECL | Change vs Base |
|---|---|---|---|
| 100% Optimistic | - | $11,200 | -24.5% |
| Probability-Weighted | - | $14,840 | - |
| 100% Pessimistic | - | $22,100 | +48.9% |
| Variable | Change | ECL Impact |
|---|---|---|
| GDP Growth | -1% | +$1,200 (+8.1%) |
| Unemployment Rate | +1% | +$890 (+6.0%) |
| House Price Index | -10% | +$650 (+4.4%) |
Analysis of credit quality by internal rating grade or external credit ratings.
| Rating | Grade | Stage 1 | Stage 2 | Stage 3 | Total |
|---|---|---|---|---|---|
| AAA - A | Investment Grade | $420,000 | $15,000 | - | $435,000 |
| BBB | Investment Grade | $280,000 | $32,000 | $2,000 | $314,000 |
| BB | Non-Investment | $140,000 | $45,000 | $5,000 | $190,000 |
| B and below | Speculative | $29,000 | $19,000 | $13,000 | $61,000 |
| Total | $869,000 | $111,000 | $20,000 | $1,000,000 | |
Below are sample templates for common IFRS 9 disclosures that can be adapted for your organization.
"The Company manages credit risk through a framework that includes: credit approval processes with defined authority limits, ongoing credit monitoring with early warning indicators, portfolio concentration limits by industry and geography, and collateral requirements based on borrower risk profile. Expected credit losses are calculated using internal rating models calibrated to historical default experience and adjusted for forward-looking macroeconomic scenarios..."
"The Company considers the following quantitative and qualitative indicators when assessing significant increase in credit risk: (a) 30+ days past due status (rebuttable presumption), (b) deterioration in internal credit rating by 3 or more notches, (c) placement on credit watchlist, (d) forbearance measures being granted, (e) significant adverse changes in borrower's industry or economic environment..."
"The Company uses three macroeconomic scenarios (optimistic, base, pessimistic) with probability weights of 15%, 55%, and 30% respectively. Key macroeconomic variables include GDP growth, unemployment rate, and residential property price index. Under the base scenario, GDP growth of 2.0% is assumed for Year 1, with unemployment at 4.5%..."