IFRS - Chapter 7

Question 1

When is a receivable impaired?

Answer 1

When future cash flows are less than carrying value

Question 2

What are the three steps of the impairment assessment?

Answer 2

1. Significant receivables are individually assessed
2. Significant receivables not impaired are grouped and collectively assessed
3. Insignificant receivables are collectively assessed

Question 3

What method is used to calculate the collective assessment approach for impairment measurement of receivables?

Answer 3

Percentage of receivables

Question 4

At what point should a receivable no longer be included as an asset?

Answer 4

1. When the receivable no longer has any value (ie, Bankruptcy)
2. When the receivable is transfered (ie, sold)

Question 5

Fill in the blank:

US GAAP derecognizes financial assets based on a _______ ____. US GAAP considers a transaction a sale if _______ of the receivable is transferred from the seller to the buyer

Answer 5

1. control test
2. control

Question 6

Fill in the blank:

IFRS derecognizes financial assets based on a test of ____ ___ _______ first and considers a test of control second

Answer 6

risk and rewards

Question 7

US GAAP outlines three key tests that must be satisfied to derecognize financial assets. What are they?

Answer 7

1. Transferred assets are isolated from transferor
2. Transferee has the right to pledge or sell assets
3. Transferor does not maintain control through repurchase agreement

Question 8

The transfer of receivables to a third party for cash happens in one of two ways. They are:

Answer 8

1. Secured borrowing
2. Sale of receivables
   
   • With a guarantee (recourse)
   • Without a guarantee

Question 9

When buying receivables, the purchaser generally assumes the risk of collectibility and absorbs any credit losses. A sale of this type is often referred to as a sale…

Answer 9

without guarantee (without recourse) against credit loss

Question 10

A sale without a guarantee (without recourse) is considered to be a

Answer 10

IFRS: SALE

GAAP: SALE

Question 11

A sale with a guarantee (with recourse) is considered to be a

Answer 11

IFRS: LOAN

GAAP: SALE

Question 12

What is secured borrowing?

Answer 12

When receivables are used as collateral in a borrowing transaction.

Question 13

Impairment loss is calculated as the difference between:

Answer 13

• the carrying amount (generally the principal plus accrued interest) and
• the present value of future cash flows

Question 14

Does GAAP permit the recording of a recovery of an impairment loss in a troubled debt situation?

Answer 14

No