Country value adjustment (IFRS)
The country value adjustment (LWB) (or more precisely: generalized country value adjustment) in IAS / IFRS is made for all risky claims against all debtors in a country.
Considered risk
The risk is considered that customers can no longer meet their payment obligations due to measures introduced by the state (e.g. transfer restrictions) or country-specific economic factors (e.g. currency devaluations).
calculation
The LWB is calculated as a flat rate because it is based on the total liability of a country, but not on the actual borrower . IAS leaves room for maneuver in terms of the specific design. Often formed already for individual borrowers specific allowances under IAS taken into account and reduces the LWF accordingly. Often only countries from a certain rating level are considered. No LWF is then formed for countries with a good rating . Often no country value adjustments are made for countries in the euro area and North America , since no transfer risk or country-specific risks are identified here.
Basis for the LWB calculation:
Utilization less valued collateral less EWB already formed for individual borrowers in this country.