Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than:
- those at fair value through profit or loss;
- those designated as available-for-sale; and
- those which the holder may not recover substantially all of its initial investment.
Loans and receivables shall be measured upon initial recognition at fair value plus transactions costs that are directly attributable to the acquisition of the loans and receivables. After initial recognition, an entity shall measure Loans and Receivables at amortized cost using the effective interest method.
Allowance for expected credit losses – This refers to the cumulative amount set-up against current operations to provide for losses which may arise from the non-collection of loans receivable.
Example accounting policy (Siemens Annual Report 2018):
Loans and receivables – Financial assets classified as loans and receivables are measured at amortized cost using the effective interest method less any impairment losses. Impairment losses on trade and other receivables are recognized using separate allowance accounts. The allowance for credit risks involves significant management judgment and review of individual receivables based on individual customer creditworthiness and current economic trends. Generally, valuation allowances are based on customer ratings provided by SFS, which are centrally determined based on customer information as well as information from external
rating agencies. The customer ratings also consider the country-specific component of country credit ratings. As of September 30, 2018 and 2017, Siemens recorded a valuation allowance for trade and other receivables (including leases) of € 1,176 million and € 1,391 million, respectively.
Loans and receivables (Ahold Delhaize Annual Report 2018)
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are carried at
amortized cost using the effective interest method, less any impairment losses. They are included in current assets, except for loans and receivables with
maturities greater than 12 months after the balance sheet date.
Loans and receivables
Loans and receivables
Loans and receivables Loans and receivables Loans and receivables Loans and receivables Loans and receivables