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During my practice, I’ve come across 2 impairment models – The General approach and the Simplified approach to impairment.
I’m not able to find much on this. Could this be explained?
Thank you so much for the lectures and notes provided.
Hi,
Glad you find the notes/lectures useful. Could you please be a bit more specific with regards to your query. Where have you seen these models, what are they specifically in relation to?
Thanks
This came up in the latest BPP revision kit question 12 b.
Question is on the expected credit losses on receivables. In the answer, it states the 2 options an entity has to recognize the expected losses is either The general appoach or the simplified approach.
if I go with the general approach which seems to be the one you have used in your notes. can I just learn this one?
If I had an expected credit loss and I multiply it by the probability of default do I record this as a credit to loss allowance and the debit to finance cost.
end of the year when it is unwound will it be credit to loss allowance and debit to finance costs.
When do we reduce the trade receivables?
@sal2222 said:
This came up in the latest BPP revision kit question 12 b.Question is on the expected credit losses on receivables. In the answer, it states the 2 options an entity has to recognize the expected losses is either The general appoach or the simplified approach.
The simplified approach can only be applied to trade receivable balances (contract assets and lease receivables too).
@sal2222 said:
if I go with the general approach which seems to be the one you have used in your notes. can I just learn this one?If I had an expected credit loss and I multiply it by the probability of default do I record this as a credit to loss allowance and the debit to finance cost.
end of the year when it is unwound will it be credit to loss allowance and debit to finance costs.
When do we reduce the trade receivables?
The trade receivables would be reduced if cash were received or when the balance is fully written off.
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