Applying the expected credit loss model to trade receivables
using a provision matrix
As published in 'Accountancy Cyprus', the Journal of the
Institute of Certified Public Accountants of Cyprus, March 2019
edition.
INTRODUCTION
IFRS 9 Financial Instruments is effective for annual periods
beginning on or after 1 January 2018. IFRS 9 introduces a new
impairment model based on expected credit losses. This is different
from IAS 39 Financial Instruments: Recognition and Measurement
where an incurred loss model was used.
Many assume that the accounting for financial instruments is an
area of concern only for large financial entities like banks. This
is not the case. Almost every entity has financial instruments that
they need to account for. In particular, almost every entity has
trade receivables and the new financial instruments standard
changes the way entities must think about impairment.
