International Financial Reporting Standard (IFRS) 9
For the first time, financial institutions will have to recognize not only credit losses that have already occurred but also losses that are expected in the future – is your financial institution prepared?
The IFRS 9 solution integrated with Temenos Transact is compliant with the rules under IAS 39. Now with IFRS 9, financial institutions have to analyze the business model information and the cash flow characteristics of their financial assets to determine whether the assets should be measured at amortized cost or fair value. You will also need to calculate the expected credit loss for your assets over either a 12-month or lifetime period. Temenos provides a standardized solution with the capability to support all three key areas as outlined below.
Classification & Measurement
Classification of the financial instruments into the following three buckets:
– Amortized Cost (AMC)
– Fair Value through Other Comprehensive Income (FVTOCI)
– Fair Value through Profit or Loss (FVPL)
Impairment Accounting
A new centralized impairment calculator within the system to move towards the Expected Loss Model and do the necessary Impairment Accounting by:
– Classifying the financial assets into three buckets (i.e. Stage 1, Stage 2 and Stage 3)
– Start recognizing the ECLs from the initial recognition
– Calculate and account for the ECLs based on the stage of the asset
Hedge Accounting (Optional Requirement)
The Hedge Accounting solution offers:
– Ability to state the Hedge types
– Ability to document the Hedge Relationships
– Ability to define the Accounting Rules based on the Hedge types
– Ability to raise the Hedge Accounting Entries
| Business Model | Measurement |
|---|---|
| For the contracts measured at Amortized Cost | – Ability to project the contractual cash flows of the financial instruments – Ability to compute the Effective Interest Rate (EIR) – Ability to calculate the Amortized Cost – Ability to do a disclosure at Fair Value |
| For the contracts measured at Fair Value | Equity Instruments: – Ability to recognize the unrealized profit/loss on a daily basis based on price – Ability to realize the actual profits upon sale Interest-bearing Instruments: – Ability to project the Contractual cash flows of the financial instruments – Ability to link the Market Rate to the instrument – Ability to calculate the Fair Value |
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