RECOGNITION OF CREDIT LOSS RESERVE FOR NON-BANK FINANCIAL INSTITUTIONS: ISSUES OF METHODOLOGY AND PRACTICE

Abstract

The article develops methodological recommendations for compliance with International Financial Reporting Standards (IFRS); Regulations on mandatory financial standards and requirements limiting risks on transactions with financial assets of credit unions, approved by the Order of the National Commission for State Regulation of Financial Services Markets dated 19.09.2019 № 1840; Regulations on determining the amount of credit risk by banks of Ukraine for active banking operations, approved Resolution of the National Bank of Ukraine of June 30, 2016 № 351. The requirements of IFRS 9 Financial Instruments (IFRS 9) for determining the amount of change in the fair value of a financial asset related to changes in the credit risk of such an asset are considered. The focus is on the requirements of IFRS, which establish the principle of recognizing the provision for expected credit losses on financial assets. The regulatory requirements for the company to take into account the change in the risk of default since the initial recognition when determining whether the credit risk of a financial instrument has increased significantly. The formula for calculating the reserve for expected credit losses is determined and reflected. Methods of accrual of the provision for credit losses are given. Assets and financial liabilities by quality categories are allocated. Factoring transactions are classified by maturity. The differences between the general and individual assessment of the reserve for expected credit losses are revealed. Some characteristics of credit risk by segmentation of financial instruments are given.