JPS & Partners 2017 Annual Report

Treasurer’s Report Continued
What is IFRS 9?
IFRS 9 is a new International Financial Reporting
Standard that will change the way how banks, credit
unions and other financial institutions calculate
provisions for bad debt on loans and other types of
financial instruments. This standard was implemented
January 01, 2018 and replaces an old standard called
IAS 39.
The implementation of the Standard represents a shift
from how Credit Unions and other financial institutions
calculate provisions on loans and other financial
instruments; i.e. a shift from an incurred (actual) loss
approach to an expected loss (forward looking)
approach. The Standard requires that institutions carry
out an assessment of their loans and portfolio
investments to determine the probability of default and
thereafter estimate the credit loss that could occur. In
other words, the Standard assumes that there is always
a probability that borrowers will default on their loans
and so a provision based on this probability must be
made even from day one of the loan agreement.
All credit unions within the Movement are required to
comply with the new IFRS 9. Credit Unions that fail to
abide by this standard will not have their accounts
qualified. It is therefore very important that we all be fully
prepared to adopt IFRS 9 in a timely manner.
How will this affect our Credit Union?
Institutions which have adopted the Standard effective
January 01, 2018 are required to calculate an opening
impairment provision known as expected Credit Loss
(ECL) on their loans and investment portfolio as at
December 31, 2017. The impact of IFRS 9 on credit
unions will be a significant increase in our overall
expenses. Provision for losses on all financial
instruments, implementation cost and annual support
fees are some of the major expenses. We will be
required to put aside more money to take care of
expected losses. These expenses will impact our bottom
line and ultimately the amount that we can payout as
interest and dividend to you our members.
How will the Credit Union Manage the
Effects?
Our staff have participated in a number of forums and
training sessions arranged by the League As such the
Credit Union is well prepared for the implementation of
IFRS 9.
Pushing you Beyond All Limits!
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JPS & Partners Co-operative Credit Union