IAS 36 How Impairment test

IAS 36 How Impairment test is all about this – When looking at the step-by-step IAS 36 impairment approach it comes down to the following broadly organised steps: IAS 36 How Impairment test

  • What?? – Determining the scope and structure of the impairment review, explained here,
  • If and when? – Determining if and when a quantitative impairment test is necessary, explained here,
  • IAS 36 How Impairment test or understanding the mechanics of the impairment test and how to recognise or reverse any impairment loss, if necessary. Which is explained in this section…

The objective of IAS 36 Impairment of assets is to outline the procedures that an entity applies to ensure that its assets’ carrying values are not … Read more

Service or insurance contract?

Service or insurance contract – Some contracts meet the definition of an insurance contract but their primary purpose is to provide services for a fixed fee. An entity issuing such contracts may choose to apply IFRS 15 to them if, and only if all of the following conditions are met:

Identification of Fixed fee contracts for services:

All of the following three conditions apply to a fixed fee contract for services:

Non-risk-specific price

Setting the price for an individual customer does not reflect the entity’s assessment of the risk specific to that customer

YES

Compensation by service not cash

Cash payments are not made to customers

YES

Use, not cost, drives Insurance risk

The risk transferred by the contract arises

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Control of an investee

Control of an investee exists when an investor controls an investee as it's exposed, or has rights, to variable returns from its involvement with the investee

Modification gain or loss

Modification gain or loss is amount from adjusting the gross amount of a hedged asset to reflect the renegotiated or modified contractual cash flows

Regular way purchase or sale

Regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within a market related time

ECL

The Expected Credit Losses (ECL) requirement in IFRS 9 makes the initial selection of bonds for fixed income investments much more important than before!

Currency risk

Currency risk - The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.