Credit Risk
Accounting glossary · Understand, connect, apply
Credit risk is exposure to financial loss if the other party to a financial instrument fails to meet its obligation.
Example
A seller may lose part of an invoice balance if the customer cannot pay it.
Remember the difference
Credit risk describes the exposure. Expected credit loss is an accounting estimate used for instruments within the applicable impairment model.
Browse the accounting glossary · Read the IFRS Foundation reference
Prepared with AI assistance. Examples are fictional and simplified for learning.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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