IFRS 9 Glossary
From Open Risk Manual
An IFRS 9 Glossary of Common Terms and Abbreviations
The IFRS 9 Glossary is a collection of terms relevant for the implementation of the IFRS 9 reporting standard. The glossary incorporates and extends the list of terms included in the standard[1] (Appendix A, Defined Terms), [2].
The glossary links to more detailed articles that offer more in-depth discussions and (where applicable) mathematical definitions / formulae. You can use the category tree to browse these articles directly. Scroll to the bottom for scope and status information.
| 1. Abbreviation | 2. Term | 3. Short Definition | 4. Article Link |
|---|---|---|---|
| Definition of Default | The definition of default used for measuring probability of default | Default Definition | |
| ECL | Expected Credit Loss | Probability-weighted (average) estimate of credit losses. Difference in the present value of expected and contractual cashflows | Expected Credit Loss |
| Amortised Cost | The amount at which the financial asset or liability is measured at initial recognition minus the principal repayments, plus or minus cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any loss allowance | Amortised Cost | |
| SPPI | Solely Payments of Principal and Interest | A control on the contractual terms of an asset to assess whether it is can be classified at Amortized Cost | Solely Payments of Principal and Interest |
| 12m ECL | 12-month Expected Credit Losses | The fraction of expected credit losses that may occur within the 12 months after the reporting date | 12-month Expected Credit Losses |
| Credit-Impaired Financial Asset | A financial asset is credit-impaired when one or more events that have a detrimental impact on its estimated future cash flows have occurred. | Credit-Impaired Financial Asset | |
| CL | Credit Loss | The difference between contractual cash flows and expected cashflows | Credit Loss |
| Loss Allowance | The allowance for expected credit losses on financial assets | Loss Allowance | |
| Loan Loss Provision | Same as Loss Allowance | Loss Allowance | |
| Temporary Allowance Adjustments | Adjustments used when risk factors have not been considered in the credit risk rating and modelling process as of the reporting date. | Temporary Allowance Adjustments | |
| Credit-Adjusted EIR | Credit-Adjusted Effective Interest Rate | The interest rate that exactly discounts estimated future cash payments to the amortised cost of a financial asset | Credit-Adjusted Effective Interest Rate |
| EIR | Effective Interest Rate | The interest rate that exactly discounts estimated future cash payments to the gross carrying amount of an asset or the amortised cost of a financial liability | Effective Interest Rate |
| DR | Discount Rate | The interest rate used to discount an expected loss or recovery to a present value (PV) at the reporting date using the effective interest rate (EIR) at initial recognition. The EIR takes the stated rate on the original loan and factors in any fees, transactions costs, expected prepayments and discounts or premiums. | Discount Rate |
| Effective Interest Method | The method used in the calculation of the amortised cost of a financial asset or liability and in the allocation and recognition of the interest revenue or interest expense in profit or loss over the relevant period | Effective Interest Method | |
| Gross Carrying Amount | The amortised cost of a financial asset, before adjusting for any loss allowance | Gross Carrying Amount | |
| LECL | Lifetime Expected Credit Losses | The expected credit losses that result from all possible default events over the expected life of a financial instrument | Lifetime Expected Credit Losses |
| Expected Life | The time period over which Expected Credit Loss must be estimated | Expected Life | |
| PD | Probability of Default | The probability of a default event when assessed over a given time horizon | Probability of Default |
| Lifetime PD | Lifetime Probability of Default | The probability of a default event when assessed over the lifetime of a financial asset (as opposed to a short period, e.g. 1-year PD) | Lifetime PD |
| EAD | Exposure at Default | The loan exposure amount at a future default date, taking into account expected changes in the exposure after the reporting date | Exposure At Default |
| LGD | Loss Given Default | The loss arising on default based on the difference between contractual and expected cash flows expressed as a percentage of the EAD | Loss Given Default |
| LR | Loss Rate | The ratio between the amount of total losses experienced on the default of a loan or group of loans to either: the total amount of the loan or group of loans or the total amount of the loans or group of loans in default | Loss Rate |
| FLFI | Forward-Looking Information / Factors | Comprehensive credit risk information (beyond past-due information) which includes forward-looking macroeconomic information | Forward-Looking Information |
| Reasonable and Supportable Information | Information about past events, current conditions and forecasts based on relevant facts and sound judgement | Reasonable and Supportable Information | |
| SICR | Significant Increase in Credit Risk | A significant change in the estimated Default Risk over the expected life of the financial instrument that triggers the measurement of Loss Allowance at an amount equal to Lifetime Expected Credit Losses | Significant Increase in Credit Risk |
| Stage 1 Assets | Assets where 12-month Expected Credit Losses are recognised | Stage 1 Assets | |
| Stage 2 Assets | Assets where there has been a significant increase in credit risk and requiring a loss allowance resulting from all possible default events (Lifetime Expected Credit Losses) | Stage 2 Assets | |
| Stage 3 Assets | Assets for which there is objective evidence of impairment (Credit-Impaired Financial Asset) | Stage 3 Assets | |
| FVOCI | Fair Value through Other Comprehensive Income | One of the three classification categories for financial assets | FVOCI |
| FVPL | Fair Value through Profit and Loss | One of the three classification categories for financial assets | FVPL |
| LCR | Low Credit Risk | An indicator linked to low Default Risk and strong borrower capacity to meet obligations | Low Credit Risk |
| Modification Gain or Loss | The amount arising from adjusting the gross carrying amount of a financial asset to reflect the renegotiated or modified contractual cash flows | Modification Gain or Loss | |
| Impairment Gain or Loss | Gains or losses that are recognised in profit or loss and that arise from applying the impairment requirements of the IFRS 9 standard | Impairment Gain or Loss | |
| Past Due | A financial asset is past due when a counterparty has failed to make a payment when that payment was contractually due | Past Due | |
| Derecognition | The removal of a previously recognised financial asset or financial liability from an entity’s statement of financial position | Derecognition | |
| Reclassification Date | The first day of the first reporting period following the change in business model that results in an entity reclassifying financial assets | Reclassification Date | |
| Financial Guarantee Contract | A contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. | Financial Guarantee | |
| Firm Commitment | A binding agreement for the exchange of a specified quantity of resources at a specified price on a specified future date or dates. | Firm Commitment | |
| Forecast Transaction | An uncommitted but anticipated future transaction | Forecast Transaction | |
| Hedge Ratio | The relationship between the quantity of the hedging instrument and the quantity of the hedged item in terms of their relative weighting | Hedge Ratio | |
| Held For Trading | A business model for a particular financial asset or liability | Held For Trading | |
| Transaction Costs | Incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability | Transaction Costs | |
| G-CRAECL | Guidance on credit risk and accounting for expected credit losses | The updated guidance by the Basel Committee on Banking Supervision on sound credit risk practices associated with the implementation and ongoing application of expected credit loss (ECL) accounting frameworks | BIS Site |
Scope and Status
The scope of the glossary is the newly introduced terms and concepts (which may raise new issues and challenges) rather than existing credit loss accounting terminology. Resources provided in the IFRS 9 Modeling Resources page provide the raw material for the glossary, but that knowledge base is augmented with further interpretation by Contributors.
The glossary aims to cover both formal terms encountered in the Standard and informal terms that have been adopted by the community of users.
As with all other entries of the Open Risk Manual, the glossary is not a static publication but a dynamic document with new content added and/or modified at any time. You can help us maintain this glossary up-to-date by submitting additions / corrections (Use info at openrisk eu). This glossary is provided as-is without any warranties of completeness and/or accuracy or other fitness for purpose. In case of doubt please consult official sources.
