Chapter 2 - Impairment

Question 1

Which assets are subject to impairment under IFRS 9 (4)

Which are not and why?? (2)

Answer 1

Debt instruments measured at amortized cost or FVTOCI

Loan commitments and financial guarantee contracts

Contract assets under IFRS 15

Lease receivables under IFRS 16

NOT INCLUDED
Assets shown at FVTPL as impairment already taken into account in revaluation at reporting date

Equity assets

Question 2

What is the equation for expected loss (EL)

Answer 2

Expected loss (EL) = Exposure at default (EAD) * Loss given default (LGD) (%) * Probability of default (PD)