impairment of financial asset

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September 6, 2020 at 10:36 am #583652
toushiga
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Hello Sir, for this ACCA technical article
:”https://www.accaglobal.com/gb/en/student/exam-support-resources/professional-exams-study-resources/strategic-business-reporting/technical-articles/impairment.html”

“Simplified approach
For trade receivables there is a simplified approach in that no credit loss allowance is recognised on initial recognition. Any loss allowance will be the present value of the expected cash flow shortfalls over the remaining life of the receivables. This approach uses the conventional matrix method (aged receivables list) of considering historically observed default rates and adjusted for forward-looking estimates.”

The simplified approach for trade receivable is not recognise the lifetime ECL , why its stated no credit allowance is recognised?
September 6, 2020 at 2:32 pm #583681
Stephen Widberg
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Under the simplified approach a credit loss allowance for entire lifetime losses can be recognised at any time. I suppose this could include initial recognition but it would be a strange business that decides to sell something knowing they will not get paid.
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