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Hi, what is the impairment loss for litigation and claims? The outstanding balance of legal expense would become greater than before?
Could you explain with examples why there is an impairment loss on the claims (it is not the asset type account), thanks
Catherine, you’re clearly talking about a printed solution that you have read and don’t understand
Unfortunately, I have no idea which question it is to which you refer and, until I have that question in front of me, I can be no help
Give me a sporting chance and tell me an exam reference (eg June 2014) or, if you can’t do that, at least give me the name of the question and I’ll see if I can find it on the internet
Mike,
It is not from past paper. But i was wonder to see it from the other sources of material.
This is the extract from the material:-
“The auditor should consider whether management has recognised any impairment loss in the financial statements for litigation and claims. If not, the auditor should consider whether it is necessary to do so. The auditor should perform audit procedures such as those described in the below.
– obtain details of all impairment losses which have been included in the financial statements and all contingencies that have been disclosed.
– consider the nature of the entity’s business. would you expect to see any other e.g. impairment losses warranties?
– determine for each material impairment loss whether it is probable that a transfer of economic benefits will be required to settle the obligation through the following procedures: considering the likelihood of reimbursement” …….
Thank you
Strange expression to use when talking about provisioning
Is this from an official publisher or some friend of yours?
The answer is suggesting audit steps to confirm the reasonableness and completeness of the entity’s provisions
I would certainly not have used the expression “impairment loss”
I’d be interested to hear the identity of the source
Hmm.
The interpretation that I place on the expression ‘impairment loss’ is the need to increase a provision in the financial statements this year when compared with the provision amount brought forward from last year
And I still find it a strange way of describing the need to increase a provision!
Catherine, I was just looking through the financial annual report of RBS bank – here’s the link) https://investors.rbs.com/~/media/Files/R/RBS-IR/results-center/annual-report-2015.pdf – and on page 100 I find the bank’s policy concerning impairment losses!
So I have to confess that it isn’t apparently so unusual!
Still, it’s a funny way to describe an increase in a provision!
If the recoverability of loan receivable (banking industry) is deteriorating, would it be at high risk for the following assertions?
1) valuation of loan receivable as there is at risk of understatement of bad debt
2) existence of loan receivable as the recorded debtor become go bankrupt and they may not be existed at the year endDo i have any misinterpretation?
Thanks
Isn’t the second one the same as the first?
“Risk of understatement of bad debt” is surely the same as “debtor is bankrupt (and should therefore be included within bad debts written off)”
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