AERO SERVICES CREDIT UNION CO-OPERATIVE

SOCIETY LIMITED

IFRS 9 –

FINANCIAL

INSTRUMENTS

WHAT IS IFRS 9? IFRS 9 is the International Financial

Reporting Standard that governs the

classification and measurement of

financial instruments

IFRS 9 became mandatory January 1,

2018

ASCU’s Financial Instruments refer to our loans and

investments ($255,257,011) which represent 88% of our

Total Assets ($290,954,413)

48%

40%

6%

4% 2%0%

TOTAL ASSETS

LOANS

INVESTMENTS

FIXED ASSETS

CASH & BANK

RECEIVABLES

INVENTORY

OLD VS NEW MODELS

• OLD MODEL

o Recognize loss only on default

• IFRS9 MODEL

o Must provide for loss upfront. As soon as loan is granted

THREE STAGE PROCESS

• STAGE 1

o Loan is granted. Must set up provision for 12 months’ losses

o Set up provision for 12 months based on probability formula

• STAGE 2

o If loan actually defaults (31 days and over)

o Provision also based on probability; provision for lifetime balance of the

loan

THREE STAGE PROCESS

• STAGE 3

oWhere loan is not recoverable, a higher probability is

assigned for provision of loss

HOW DOES IFRS 9 AFFECT ASCU?

IFRS 9 impacts entire operations of ASCU

There will be a change in systems/processes for data

gathering

Increased risk profiling of members and loans

There will be provisioning for ALL loans

• Twelve (12) months for new and existing loans

• Lifetime provision for loans in default >30days

LOAN

DELINQUENCY

AGE

DELINQUENT

LOAN BAL

EXPECTED

PROVISION

STAGE

1 – 30 DAYS $1,741,569 $540,560 1 – 12 MONTHS

31 - 9999 $10,070,324 $10,070,324 2 – 3 LIFETIME

TOTAL $11,811,893 $10,160,884

A GLIMPSE AT THE IMPACT ON

PROVISIONING

WHAT DOES IFRS 9 MEAN TO MEMBERS?

Avoid defaulting on loans

Continuous update of members information

Likelihood of reduced surplus, dividends and rebate