Issues of accounting for the impairment of financial instruments
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Date
2019
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Ivane Javakhishvili Tbilisi State University Press
Abstract
Users of financial reporting information are interested in whether there is a risk of impairment of financial instruments – the likelihood of emerging a loss due to non-compliance with contractual obligations. To provide the users with a fair information on the financial instrument, IAS 9 „Financial Instruments” requires their testing on impairment . A purpose of impairment-related requirements is to recognize the expected credit loss
for all financial instruments in the financial statements.
IAS 9 requires to measure an impairment of the financial instruments by the Expected Credit Loss (ECL) model – to recognize the financial assets by amount of the ECL. A purpose of this model is to provide users of financial reporting information with the relevant information on the volume, timing and future uncertainties of a reporting entity. Therefore, under this model, a company should not postpone the recognition of credit losses until there is objective evidence of impairment. Rather, this model requires the recognition of credit losses throughout the existence of a financial asset and the updating of expected losses at each reporting date in order to provide timely a relevant information to stakeholders.
Description
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Keywords
Financial Instruments, Credit risk, Credit loss, Impairment model, Default rate
Citation
The 4th International Scientific Conference: "Challenges of Globalization in Economics and Business", Tbilisi, 2019, pp. 198-204