New illustrative examples for ISA 540 (Revised) implementation: Expected credit losses

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Aug 31, 2020

On August 31, 2020, the International Standard on Auditing (ISA) 540 (Revised) Implementation Working Group published illustrative examples for auditing expected credit loss (ECL) accounting estimates.

The examples illustrate how an auditor could address certain requirements of ISA 540 (Revised). They were developed to assist the auditor in understanding how ISA 540 (Revised) may be applied to:

  • International Financial Reporting Standard (IFRS) 9 Impairment (ECL) – Credit Card
  • IFRS 9 Impairment (ECL) – Significant Increase in Credit Risk
  • IFRS 9 Impairment (ECL) – Macroeconomic Inputs and Data

The examples illustrate accounting estimates with varying characteristics and degrees of complexity. Each example illustrates a selection of requirements from ISA 540 (Revised). Not all requirements are addressed in each example, nor do they cover all parts of those requirements that have been selected. The requirements selected across each example vary to illustrate different aspects of ISA 540 (Revised) and to focus on those requirements that are most relevant to the example.

The three ECL examples are intended to be read together, as requirements that are addressed in one example may also be relevant to another example. For example, the Macroeconomic Inputs and Data example is focused primarily on the audit implications of such data, and does not repeat material in the other examples, which nevertheless may be relevant and applicable to that example more broadly.

Review the press release and examples on the IAASB's website.

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