IFRS9 Financial Instruments及IFRS15.docx

IFRS 9 Financial InstrumentsFinancial Asset – Debt Instrument (Amortized Cost) ImpairmentThe impairment model in IFRS 9 is based on the premise of providing forexpected losses.Step 1: The 12-month expected credit losses (expected credit losses thatresult from those default events on the financial instrument that are possiblewithin 12 months after the reporting date); orStep 2: Full lifetime expected credit losses (expected credit losses that resultfrom all possible default events over the life of the financial instrument).A loss allowance for full lifetime expected credit losses is required for afinancial instrument if the credit risk of that financial instrument hasincreased significantly since initial recognition, as well as to contract assetsor trade receivables that do not constitute a financing transaction inaccordance with IFRS 15.IFRS 9 Financial InstrumentsFinancial Asset – Debt Instrument (Amortized Cost) ImpairmentThe Standard suggests that ‘investment grade’ rating might be an indicatorfor a low credit risk.The requirements also contain a rebuttable presumption that the credit riskhas increased significantly when contractual payments are more than 30days past due. ACCA-P2 4 IFRS 9 Financial InstrumentsFinancial Asset – Debt Instrument (Amortized Cost) ImpairmentTransystems has a portfolio of $40,000 financial assets (debt instruments)that have two years to maturity and are correctly accounted for at amortizedcost. Each asset has a coupon rate of 10% as well as an effective interestrate of 10%. No previous impairment loss has been recognized.At the year-end information has emerged that the sector in which theborrowers operate is experiencing tough economic conditions.IFRS 9 Financial InstrumentsFinancial Asset – Debt Instrument (Amortized Cost) ImpairmentAfter considering a range of possible outcomes, the overall rate of return fromthe portfolio is expected to be approximately 8% per annum for each of thenext two years.The director of Transystem believe th