IFRS 9 Transitional Arrangements - Business Combination

The static component of the transitional arrangement (Article 473a of the Regulation (EU) No. 575/2013) is based on the amounts recognised by institutions as IFRS 9 expected credit losses on “1 January 2018 or on the date of initial application of IFRS 9” and as IAS 39 impairment amounts on “31 December 2017 or the day before the initial application of IFRS 9” respectively. Given that the newly acquired subsidiaries were not part of the consolidated balance sheet of the group at either of those dates, the amount to be considered under the “static approach” would therefore not change as a result of the described business combination. In the case of the dynamic component calculation, the amount subject to the application of transitional arrangements is calculated at the end of each reporting period by comparing the total amount of expected credit losses for non-credit impaired instruments at the reporting date with the amount as of 1 January 2018 2020 or the date of initial application of IFRS 9 (paragraphs 3(a) and 3(b) respectively of Article 473a) , whichever is later . In this case, from the moment that the new subsidiaries are included in the consolidated financial statements of the group, at each specific reporting date, the respective expected credit losses recognised individually by the new subsidiaries that are now part of the consolidated figures are relevant for the calculation of the amount referred to in Article 473a(3)(a).  This is valid for the “new dynamic” component introduced with Regulation (EU) 2020/873 amending Regulations (EU) No 575/2013 and (EU) 2019/876. As regards the “old dynamic” component, the relevant reference dates to be considered when comparing the level of expected credit losses, as established under paragraph 1 of Article 473a, are 1 January 2020 and 1 January 2018 or the date of initial application of IFRS 9, whichever is later.