[jjanie]

Hello,

to the issue of unwinding, NPV, NBV, gross carrying value and allowance under IFRS 9:
IAS 39 defines EIR (except of POCI assets) to calculate over the expected cash flows without including credit risk. (output is NPV, but without incorporated possible future defaults or pastdue payments). I do not understand it as the total NPV for the instrument, because credit risk is missing.
Credit risk is incorporated in ECL (EAD*LGD*PD*CCF),… – if an entity uses IRB approach for allowances.
If we sum the two following parameters:
EIR*NPV(wo credit risk) and ECL (=credit risk in term of dollars), we get the total impairment for the period.
This means: unwind + loss allowances = total impairment.
If total impairment = Gross carrying amount minus NPV, this is not compliant with the previous calculation, where NPV did not contain credit risk.

what is the understanding of NPV without credit risk and how could you explain the effect on the unwinding?

It seems, there should be two different NPVs: wo and with credit risk…

thank you for clarification.

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