12-month expected credit loss is the portion of the lifetime expected credit losses that represent the expected credit losses that result from default events on a financial instrument that are possible within the 12 months after the reporting date. To get background on the impairment model introduced in IFRS 9 see ‘Impairment of financial assets‘.
Initial recognition 12-Month Expected Credit Losses
At initial recognition of a financial asset, an entity recognises, as a standard approach, a loss allowance equal to 12-month expected credit losses. The actual loss does not need to take place within the 12 month period; it is the occurrence of the default event that ultimately results in that loss. An exception is purchased or originated … Read more