According to a case study published by PwC last fall, banks and financial institutions are not the only entities impacted by new credit loss reporting rules.
The case study demonstrated that IFRS 9, going into effect for financial reporting after January 1, 2018, will affect some non-financial services entities even if they have simple financial instruments such as loan or trade receivables.
If your corporation is affected by IFRS 9, it means that credit losses must be reported with forward-looking data on the “expected credit loss.” In addition, for audit purposes, affected companies could be non-compliant in their financial reporting if they do not adjust their credit loss reporting methods in accordance with IFRS 9.
The goal today — as it always has been for financially healthy companies — is to reduce your risk of “expected credit losses.” It’s just that now you may have to reasonably calculate and report those losses that haven’t happened yet! This means a reevaluation of those 120 plus DPD revenue items.
Regardless of whether expected credit losses become reality or not, on paper this change could impact a company’s bottom line business value and possibly even banking relationships and loan covenants.
This forward-looking data gathering is much easier with a strong credit monitoring and trade receivables management system in place. If you haven’t yet determined through your CPA if your trade receivables are impacted by the IFRS 9 new credit loss reporting standards, it’s time to find out. Then talk to The Credit Department, Inc. about our services to reduce your risk of credit losses in your accounts receivables portfolio.
Click here to learn more about our solutions for accurate trade receivables management and cash flow improvement.