The Group has been applying IFRS 9, which means that it determines the expected credit losses (‘ECL’) related to debt instruments measured at amortised cost and at fair value through other comprehensive income, regardless of whether impairment indicators are present.
With regard to trade receivables within the EPS and FPS portfolios, the Group applies the simplified approach and measures the write-down for expected credit losses at an amount equal to the expected credit losses throughout the receivables lifetime, with the use of a provisions matrix. The Group uses its historical data regarding credit losses, adjusted in the respective cases on the basis of information regarding the future.
With regard to trade receivables within the ASS portfolio, due to its significant fragmentation and higher risk profile compared to the EPS and FPS segments, it is expected that the historical repayment rates of receivables may not represent the full image of the expected credit losses, to which the Group may be exposed. The risk of counterparty insolvency within the ASS segment is assessed based on the counterparty ratings assigned in accordance with the receivables insurance agreements availed of by the Group, or – if a respective counterparty is not covered by an insurance agreement as at the balance-sheet date – with the use of an internal scoring model. Based on such rating, the identified credit risk is transformed into a probability of default. In accordance with IFRS 9 Financial Instruments, the expected credit loss is calculated in consideration of the estimates of potential refunds from the collaterals established (mainly receivables insurance agreements signed by the Company).
With regard to other financial assets, the Group measures the write-down for expected credit losses in the amount equal to 12-month expected credit losses. If the credit risk related to the respective financial instrument is much higher from the moment of the initial recognition, the Group measures the write-down for expected credit losses on account of the financial instrument at the amount equivalent to the expected credit losses throughout the lifetime.
The Group assesses that the credit risk related to the specific financial instrument is much higher from the date of its initial recognition, if the delay in payment exceeds 90 days.
At the same time, the Group assesses that default of a debtor takes place when the delay in payment exceeds 180 days.
