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Accounting Changes
 12 Months Ended
Dec. 31, 2019
Accounting Changes  
ACCOUNTING CHANGES

NOTE 02

ACCOUNTING CHANGES

 

A.IFRS 16 ADOPTION

 

On January 1, 2019, IFRS 16 Leases has become effective; this standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. The objective is to ensure that lessees and lessors provide relevant information in a manner that faithfully represents those transactions. IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, thus a lessee is required to recognise a right-of-use asset representing its right of use the underlying leased asset and a lease liability representing its obligation to make lease payments.

 

IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases—Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

 

The Bank has elected to adopt IFRS 16 using a modified retrospective approach at the date of initial application, therefore, it has recognise a right-of-use asset for an amount equal to the lease liability, which amounted MCh$154,284.

 

Below is the detail of impacts as of January 1, 2019:

  

   Balance as        Balance as 
   of December 31, 2018   Additions    of January 01, 2019 
   MCh$   MCh$    MCh$ 
              
Right of use assets   -    154,284     154,284 
Subtotals Assets         -    154,284     154,284 
                 
Lease liability   -    154,284     154,284 
Subtotals Liabilities   -    154,284     154,284 

 

For more details, see Note 14.

 

B.IFRS 9 ADOPTION – Transition disclosure

 

The following disclosure provides the impact of adopting IFRS 9 on the statements of financial position and retained earnings including the effect of replacing IAS 39's incurred credit loss provision with IFRS 9's ECLs.

  

      IAS 39 carrying amount           IFRS 9 carrying amount 
      Category   Amount   Reclassification   Remeasurement   Amount   Category 
   Ref  MCh$   MCh$   MCh$   MCh$   MCh$   MCh$ 
AMORTISED COST                           
Cash and deposit in banks                           
Opening balance under IAS 39 and closing under IFRS 9      AC    1,452,922    -    -    1,452,922    AC 
Interbank loans, net                                 
Opening balance under IAS 39      AC    162,213    -    -    -    - 
Remeasurement: ECL Allowance  A   -    -    (162,213)   -    -    - 
Closing balance under IFRS9      -    -    -    -    -    - 
Loans and accounts receivable from customers, net                                 
Opening balance under IAS 39      AC    26,772,544    -    -    -    - 
Addition: from interbank loans  A   -    -    162,213    -    -    - 
Subtraction to FVOCI (net of allowance)  B   -    -    (107,846)   -    -    - 
Remeasurement: ECL Allowance      -    -    -    (97,322)   -      
Closing balance under IFRS 9      -    -    -    -    26,729,589    AC 
Total financial assets measured at amortised cost           28,387,679    (107,846)   (97,322)   28,182,511    - 
FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (FVOCI)                                 
Available for sale investment (debt securities)                                 
Opening balance under IAS 39      FVOCI    2,574,546    -    -    -    - 
Remeasurement: ECL Allowance      -    -    -    -    -    - 
Closing balance under IFRS 9      -    -    -    -    2,574,546    FVOCI 
Loans and accounts receivable from customers, net                                 
Opening balance under IAS 39      AC    -    -    -    -    - 
Addition: from amortised cost (net of allowance)  B   -    -    107,846    -    -    - 
Remeasurement: from cost to FV  B   -    -    -    (236)   -    - 
Remeasurement: ECL Allowance  B   -    -    -    291    -    - 
Closing balance under IFRS 9      -    -    107,846    55    107,901    FVOCI 
Investment in associate and other companies – Bladex (equity instruments)                                 
Opening balance under IAS 39      Cost    136    -    -    -    - 
Remeasurement: from cost to FV  C   -    -    -    306    -    - 
Closing balance under IFRS 9      -    -    -    306    442    FVOCI 
Investment in associate and other companies- Stock exchange (equity instruments)                                 
Opening balance under IAS 39      FV    287    -    -    -    - 
Remeasurement: from cost to FV      -    -    -    -    -    - 
Closing balance under IFRS 9  C   -    -    -    -    287    FVOCI 
Total financial assets measured at FVOCI      -    2,574,969    107,846    361    2,683,176    - 

 

  Ref IAS 39 carrying amount     IFRS 9 carrying amount
  Category Amount Reclassification Remeasurement Amount Category
  MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
FAIR VALUE THROUGH PROFIT OR LOSS (FVPL)          
Trading investment              
Opening balance under IAS 39 and closing under IFRS 9   FVPL 485,736 - - 485,736 FVPL
Derivative contracts (hedging + trading)       - - - -
Opening balance under IAS 39 and closing under IFRS 9   FVPL 2,238,647 - - 2,238,647 FVPL
Total financial assets measured at FVTPL     2,724,383 - - 2,274,383 -

 

The following explains how applying the new requirements of IFRS 9 led to changes in classification of certain financial assets held by the Bank as shown in the table above:

 

(A)Interbank loans

 

According to the new balance presentation, the Bank has grouped interbank loans with the loans and account receivable since both are measured at amortised cost, and evaluated together for impairment purposes.

 

(B)Loans and account receivable measured at fair value through other comprehensive income

 

The Bank enters into arrangements with its major customers for project finance and syndicated loans and, sometimes the amount requested exceeds the Bank's limit for a single client exposure under the established credit risk policy, accordingly, the transaction is approved under the condition to sell a portion of the facility in the near term, which is classified under this category. Also, the Bank has decided to include loans that the Bank are expecting to sell if the market conditions are favorable to the Bank in this category. These loans are measured at fair value through other comprehensive income, and subject to impairment requirements.

 

(C)Investment in equity instrument

 

The Bank has elected to irrevocably designate non-trading equity securities required to operates in Chile and outside at FVOCI as permitted under IFRS 9. Bladex and stock exchange securities were previously measured at cost as permitted by IAS 39. The changes in fair value will no longer be reclassified to profit or loss when they are disposed of.

  

The following table reconciles the December 31, 2017 period's closing impairment allowance measured in accordance with the IAS 39 incurred loss model to the new impairment model:

 

  

Loans loss allowance

under IAS 39

   Reclassification   Remeasurement  

Loans loss allowance

under IFRS 9

 
   MCh$   MCh$   MCh$   MCh$ 
Loans and receivable (IAS 39)/ Financial assets at amortised cost (IFRS 9)                
Interbank loans   472    (472)   -    - 
Loans and account receivable from customers   790,685    84    97,322    888,091 
Total loans and account receivable at amortised cost   791,157    (388)   97,322    888,091 
Available for sale investment (IAS39)/Financial assets at FVOCI (IFRS 9)                    
Loans and account receivable from customer – at FVOCI   -    388    (291)   97 
Total financial assets at FVOCI   -    388    (291)   97 
Other credit- related commitments                    
Contingent liabilities   8,404    -    (3,767)   4,637 
Loan commitments   -    -    19,124    19,124 
Total contingents   8,404    -    15,357    23,761 
Total provision for loan losses   799,561    -    112,388    911,949 

  

The composition of the loan portfolio as of January 1, 2018 is as follows:

 

   Assets before allowances   ECL allowance     
As of January 1, 2018  Stage 1   Stage 2   Stage 3   Total   Stage 1   Stage 2   Stage 3   Total   Net Assets 
   MCh$   MCh$   MCh$   MCh$   MCh$   MCh$   MCh$   MCh$   MCh$ 
                                     
Commercial loans                                    
Interbank loans   162,685    -    -    162,685    13    -    -    13    162,672 
Commercial loans   8,743,179    595,436    543,807    9,882,422    56,546    36,541    246,870    339,957    9,542,465 
Foreign trade loans   1,464,059    56,110    54,344    1,574,513    4,883    849    33,480    39,212    1,535,301 
Checking accounts debtors   173,738    8,005    13,953    195,696    2,302    411    9,385    12,098    183,598 
Factoring transactions   441,014    4,035    4,841    449,890    837    91    3,366    4,294    445,596 
Student loans   70,984    7,402    9,904    88,290    3,644    2,329    6,092    12,065    76,225 
Leasing transactions   1,235,103    161,882    60,019    1,457,004    8,946    9,553    27,835    46,334    1,410,670 
Other loans and account receivable   110,307    5,663    36,623    152,593    2,640    1,549    24,551    28,740    123,853 
Subtotal   12,401,069    838,533    723,491    13,963,093    79,811    51,323    351,579    482,713    13,480,380 
                                              
Mortgage loans                                             
Loans with mortgage finance bonds   21,529    1,230    1,301    24,060    25    51    172    248    23,812 
Endorsable mortgage mutual loans   107,900    2,973    4,205    115,078    100    143    628    871    114,207 
Other mortgage mutual loans   8,061,800    465,146    430,811    8,957,757    14,477    20,033    72,390    106,900    8,850,857 
Subtotal   8,191,229    469,349    436,317    9,096,895    14,602    20,227    73,190    108,019    8,988,876 
                                              
Consumer loans                                             
Installment consumer loans   2,378,614    234,044    298,084    2,910,742    51,172    46,866    157,811    255,849    2,654,893 
Credit card balances   1,324,742    20,916    19,322    1,364,980    20,443    7,633    11,982    40,058    1,324,922 
Leasing transactions   4,627    47    41    4,715    1,013    23    74    1,110    3,605 
Other consumer loans   270,410    2,573    4,272    277,255    84    35    223    342    276,913 
Subtotal   3,978,393    257,580    321,719    4,557,692    72,712    54,557    170,090    297,359    4,260,333 
                                              
Total   24,570,691    1,565,462    1,481,527    27,617,680    167,125    126,107    594,859    888,091    26,729,589