Bad Debt Provision - IFRS 9

@Narmada ,

Have you tried bad debt management. Does that have any limitations?

Shehan Almeida.

Hi Narmada,

As per IFRS 9 – Impairment provision is made based on the Expected Credit Loss. Based on management judgment and impairment policy the impairment could be done based on individual impairment or collective impairment model.

In individual impairment , the discounted expected cash flows are compared with the customer receivable balance and for the shortage, a provision is made. In the Collective Impairment model, receivables are segregated based on homogenous risk characteristics and then based on historical pattern of repayment, i.e. the Probability of Default and the loss given defaults, the impairment is computed.  

IFS bad debt functionality is more towards making specific provisions for individual ledger items and I doubt whether you can use it to meet IFRS 9 requirements.

However, the provisions can be calculated as per the IFRS requirements and you may use a generic manual voucher entry for posting them in the system.

That is how I perceive your requirement.

Best regards,

Chirantha.

hi @Chirantha,

Many thanks for the prompt reply. One of our customer require to calculate expected credit loss through the application and post the bad debt provision based on that. There is no option to calculate  this ECL in standard IFS application.

just to check is there any customization or localization done to cater the same requirement where we can refer.

Best Regards

Narmada

hi @Shehan Almeida,

Many thanks for the prompt reply. Standard application required to provide the provision % & customer required to calculate the provision % based on historical data.

Best Regards

Narmada