Auditors often request an IFRS 9 model / ECL (Expected Credit Loss) even for entities reporting under IFRS for SMEs, which can create confusion. Strictly speaking, IFRS for SMEs does not require application of IFRS 9 Financial Instruments. Instead, SMEs apply a simpler incurred loss approach under IFRS for SMEs, where impairment is recognised when there is objective evidence that amounts may not be recoverable.

In practice, however, auditors often request an IFRS 9 model / ECL assessment as a structured way of supporting impairment provisions, particularly for trade receivables. This approach typically uses ageing analysis, historical default rates, and forward-looking assumptions to estimate expected credit losses. While the terminology comes from IFRS 9, the underlying purpose remains the same even under IFRS for SMEs: ensuring receivables are stated at their recoverable amount and that provisions are adequately supported with evidence.

Ultimately, the use of an IFRS 9 model / ECL is more of a methodology adopted for audit robustness and consistency rather than a strict compliance requirement for SMEs. The key distinction is that IFRS 9 formalises ECL into a mandatory framework for Full IFRS reporters, while IFRS for SMEs allows more judgement. However, in audit practice, the IFRS 9 model / ECL approach has become a widely accepted way of demonstrating that impairment assessments are reasonable, supportable, and aligned with prudent financial reporting