Impairement of Financial Instruments

Question 1

If there is a significant Credit risk from our customer, what type of impairment do we bring in?

Answer 1

Lifetime Expected Credit loss

Question 2

If there is no significant credit risk from our customer, what type of impairment do we have to bring in?

Answer 2

12 Month Expected Credit loss

Question 3

When do we analyse if there is a credit risk from our customer?

Answer 3

End of year - Year end

Question 4

When do we bring in Expected credit losses?

Answer 4

If you expect it to happen in the next 12 months.

If things get worse, then you bring in lifetime expected credit losses

Question 5

Define Expected Credit Loss

Answer 5

The amount you are expected the receive and the amount you actually receive

Question 6

If we expected a credit loss within 12 months initially, where do we calculate the interest on?

Answer 6

Gross Amount

Question 7

If we expect a significant credit risk from our customer, where do we calculate the interest on?

Answer 7

Gross Amount

Question 8

If there is a significant credit risk from our customer and the customer has not paid for more than 30 days, where do we calculate our interest on?

Answer 8

Net Amount

Note that when calculating this, you put a 0 in Rec amount

Question 9

For lifetime Expected credit loss, what is the double entry?

Answer 9

Dr I/S Cr Loss Allowance

Question 10

If the lifetime expected credit loss changes to 12 months expected credit loss, what is the double entry?

Answer 10

Dr Loss Allowance Cr I/S