IFRS 9 (as adopted by UK)

IFRS 9 ECL Calculator
United Kingdom

IFRS 9 expected credit loss calculator with United Kingdom-specific regulatory context, FRC expectations, and local macroeconomic indicators for forward-looking adjustments.

Provision Matrix

Define aging buckets, enter gross carrying amounts and historical loss rates. Per IFRS 9.B5.5.35.

Forward-Looking Adjustment

Required by IFRS 9.5.5.17. Purely historical rates are not IFRS 9 compliant.

Advanced Features

Optional: probability-weighted scenarios, movement schedule, specific assessment, and entity details.

IFRS 9 ECL Audit Working Paper Template — free PDF

Practical audit guide covering the simplified approach provision matrix methodology, forward-looking adjustment documentation template, probability-weighted scenario framework, IFRS 7.35H movement schedule template, common ISA 540 findings on ECL estimates, and industry benchmark loss rates for 12 sectors.

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IFRS 9 ECL in United Kingdom — IFRS 9 (as adopted by UK)

The United Kingdom adopted IFRS 9 Financial Instruments as part of UK-adopted international accounting standards, effective for annual periods beginning on or after 1 January 2018. Following Brexit, the UK Endorsement Board (UKEB) assumed responsibility for endorsing IFRS standards for use in the UK. IFRS 9 as adopted by the UK is substantively identical to the IASB-issued version, including the expected credit loss impairment model in Section 5.5. The Financial Reporting Council (FRC) has issued thematic reviews and guidance that shape practical expectations for ECL measurement and disclosure. UK entities must navigate Companies Act 2006 reporting requirements alongside IFRS 9, and HMRC guidance on the tax deductibility of ECL provisions adds a further layer of complexity. The FRC Lab has published reports examining the quality of ECL disclosures among UK-listed entities, identifying areas where practice can be improved. UK companies reporting under IFRS 9 should pay particular attention to the FRC's expectations regarding forward-looking information, scenario weighting, and the transparency of significant judgements in their ECL estimates.

Regulatory Context — FRC

The FRC has conducted multiple thematic reviews of IFRS 9 ECL implementation since the standard became effective. Key areas of FRC scrutiny include the adequacy of forward-looking information incorporated into ECL models, the transparency of significant increase in credit risk (SICR) thresholds and staging criteria, and the quality of sensitivity disclosures for ECL estimates. The FRC's Corporate Reporting Review (CRR) team has written to companies requesting improvements in ECL disclosures, particularly around the explanation of macro-economic scenarios and their probability weightings. The FRC has also highlighted concerns about the use of management overlays and post-model adjustments, expecting entities to provide clear explanations of the nature, rationale, and quantified impact of any such adjustments. Following COVID-19 and subsequent economic disruptions, the FRC intensified its focus on how entities incorporate unprecedented economic conditions into their ECL frameworks. The Bank of England also provides macroeconomic scenarios that many UK entities reference when developing their forward-looking ECL assumptions.

Practical Guidance for United Kingdom

For UK entities applying the simplified approach to trade receivables under IFRS 9.5.5.15, a provision matrix based on historical loss rates adjusted for forward-looking information is the most common methodology. Historical loss data should be sourced from internal credit management records, segmented by customer type, geography, industry sector, and ageing bracket. Forward-looking adjustments should reference UK-specific macroeconomic indicators including the Bank of England base rate, UK GDP growth forecasts, unemployment projections from the Office for National Statistics (ONS), and sector-specific indicators from bodies such as the Confederation of British Industry (CBI). Post-Brexit trade dynamics, including customs delays and currency fluctuations affecting cross-border receivables with EU counterparties, should be factored into forward-looking overlays where material. Entities should document the linkage between macro-economic indicators and expected default rates, supported by historical back-testing of model performance.

Audit Expectations

The FRC Audit Quality Review (AQR) team has consistently flagged ECL as an area requiring enhanced audit attention. Common inspection findings include insufficient independent challenge of management's SICR thresholds and staging criteria, inadequate testing of the completeness and accuracy of data inputs to ECL models, limited assessment of the reasonableness of forward-looking scenarios and their probability weightings, and failure to evaluate the appropriateness of management overlays with sufficient scepticism. UK auditors are expected to engage specialists where ECL models involve complex statistical techniques and to perform retrospective reviews comparing prior-period ECL estimates with actual credit loss outcomes.

United Kingdom-Specific Considerations

UK-specific considerations for IFRS 9 ECL include the interaction between ECL provisions and distributable profits under the Companies Act 2006. ECL charges flow through profit or loss and reduce realised profits, which directly impacts distributable reserves. HMRC treats IFRS 9 ECL provisions as deductible for corporation tax purposes only to the extent that they meet the conditions in the loan relationships and derivative contracts legislation in CTA 2009. Specific provisions are generally deductible, but collective provisions based on statistical models may face additional scrutiny. The Bank of England's Prudential Regulation Authority (PRA) has issued supervisory statements relevant to banks and building societies, requiring them to ensure their ECL methodologies are robust, well-governed, and subject to independent validation. For non-financial entities, the FRC expects ECL disclosures in the annual report to align with the narrative discussion of credit risk in the strategic report and the risk management disclosures under IFRS 7.

Forward-Looking Data Sources

Bank of England Base Rate
Source: Bank of England
Key reference rate influencing borrowing costs, default rates, and the discount rate applied to expected credit losses across all sectors
UK Unemployment Rate
Source: Office for National Statistics (ONS)
Leading indicator of consumer and SME credit deterioration, directly correlated with trade receivable default rates
UK GDP Growth Forecast
Source: Bank of England Monetary Policy Report
Macro-economic growth trajectory used to weight base, upside, and downside ECL scenarios
UK Insolvency Statistics
Source: The Insolvency Service
Quarterly corporate insolvency data providing direct evidence of counterparty default risk trends
CBI Industrial Trends Survey
Source: Confederation of British Industry
Sector-specific business confidence and order book data useful for adjusting ECL estimates by industry segment

Common Inspection Findings

Forward-looking information not adequately incorporated — ECL models relied excessively on historical loss rates without macro-economic adjustments

SICR thresholds not sufficiently challenged — auditor accepted management's staging criteria without independent assessment of their appropriateness

Management overlays not adequately evaluated — post-model adjustments accepted without testing the underlying rationale or quantification methodology

Sensitivity analysis for ECL estimates not performed or disclosed with sufficient granularity

Retrospective back-testing of prior-period ECL estimates against actual outcomes not performed

Frequently Asked Questions — United Kingdom

How does the FRC expect UK companies to disclose ECL estimation uncertainty?
The FRC expects entities to provide quantified sensitivity analysis showing how changes in key assumptions, such as macro-economic scenario weightings and probability of default estimates, would affect the ECL balance. The FRC has written to multiple listed companies requesting improved disclosure of the range of possible outcomes and the assumptions driving the most significant estimation uncertainty. Generic or boilerplate disclosures are considered insufficient.
Are IFRS 9 ECL provisions tax-deductible in the UK?
HMRC allows deduction of impairment losses under the loan relationships regime in CTA 2009, but the deductibility depends on the nature of the provision. Specific impairments linked to identified counterparty default events are generally deductible. Collective or model-based ECL provisions may face challenge from HMRC if they are considered too remote or insufficiently linked to actual credit deterioration. Entities should maintain detailed documentation supporting the tax deductibility of their ECL charges.
What Bank of England data should UK entities use for forward-looking ECL scenarios?
The Bank of England publishes quarterly Monetary Policy Reports containing GDP growth, unemployment, inflation, and interest rate projections. The annual stress testing scenarios published for the banking sector provide severe downside assumptions. For non-financial entities, the Bank of England's Agents' Summary of Business Conditions offers qualitative insights into sectoral credit conditions. Entities should also consider ONS data on insolvency rates, consumer confidence indices, and property price forecasts from the Office for Budget Responsibility (OBR).
How should UK entities handle post-model adjustments (management overlays) for ECL?
The FRC has emphasised that post-model adjustments must be clearly disclosed with a quantified impact, the rationale explained, and a governance framework demonstrated. Overlays introduced in response to economic shocks such as COVID-19 or energy price disruptions should be reviewed regularly and unwound when the underlying risk is captured in model parameters. The FRC expects the audit committee to oversee the approval and ongoing monitoring of significant overlays.
Does the simplified approach for trade receivables differ in the UK from IASB IFRS 9?
No, UK-adopted IFRS 9 is identical to IASB IFRS 9 in this respect. The simplified approach in paragraph 5.5.15 allows entities to measure the loss allowance at an amount equal to lifetime ECL for trade receivables, contract assets, and lease receivables. The UKEB has endorsed IFRS 9 without amendments. However, the FRC's practical expectations for disclosure quality may go beyond what some entities have historically provided under the standard.

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