Loading content
IFRS 9 · Simplified approach
For trade receivables, contract assets and lease receivables, IFRS 9 allows a simplified approach: recognise lifetime expected credit losses from the start, without tracking changes in credit risk. Most entities apply it with a provision matrix.
Group receivables that share credit risk characteristics, for example customer type, sector or geography.
Place each balance in an ageing bucket such as current, 1–30, 31–60 and 61–90 days past due.
Calculate historical loss rates for each bucket from past collections and write-offs.
Adjust the rates for current conditions and reasonable, supportable forecasts, such as oil price, real estate or sector outlook.
Multiply each bucket's balance by its adjusted rate. The sum is the lifetime ECL allowance.
| Ageing bucket | Balance | Loss rate | ECL |
|---|---|---|---|
| Current | 42,150 | 0.4% | 168.6 |
| 1–30 days | 18,420 | 1.2% | 221.0 |
| 31–60 days | 7,860 | 3.5% | 275.1 |
| 61–90 days | 3,240 | 8.9% | 288.4 |
| 91–180 days | 2,110 | 21.4% | 451.5 |
AED thousands
We will walk through the method, the assumptions and the outputs, and how they would map to your balances.