Issues of accounting for the impairment of financial instruments

Thumbnail Image
Journal Title
Journal ISSN
Volume Title
Ivane Javakhishvili Tbilisi State University Press
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.
1. ფასს 9 ფინანსური ინსტრუმენტები. თარგმანი. London. IASB. 2015. 146 გვ. 2. IFRS 9. Financial Instruments Understanding the basics. PWC. London. 2017. 41 p. 3. IFRS 9: Financial Instruments – high level summary. Deloitte. London. 2016. 18 p. . 4. IFRS 9 – Financial Instruments – IAS Plus. London, 2018. 22 p. 5. IFRS in practice 2018. IFRS 9 Financial Instruments. BDO. London. 2018. 108 p. 6. Bad debt provision under IFRS. "Silvia, IFRSbox". New York. 2019. 22 p.
Financial Instruments, Credit risk, Credit loss, Impairment model, Default rate
The 4th International Scientific Conference: "Challenges of Globalization in Economics and Business", Tbilisi, 2019, pp. 198-204