IFRS 9 has revolutionized accounting standards, particularly in how financial institutions manage credit risk and report financial instruments. Under the FVOCI model, certain financial assets are recognized at fair value with changes in fair value recognized in other comprehensive income.
However, what sets this model apart is its treatment of credit risk. The ECL model requires entities to assess credit risk and recognize expected credit losses on these assets. This approach ensures that financial statements provide a more accurate reflection of an entity's financial health, considering potential credit losses over the life of the asset.
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