Impairment evaluation process fair

Impairment evaluation process fair value option
Derecognition of receivables
Receivables are also financial assets they are also a financial instrument. Receivables (often referred to as loans and receivables) are claims held against customers and other for money, goods, or services
Uncollectible accounts reveivable
Unfortunately, this situation often does not occur. For example, a customer may not be able to pay because of a decline in its sales revenue due to a downturn in the economy. Similarly, individuals may be laid off from their jobs or faced with unexpected hospital bills. Companies record credit losses as debits to bad debt expense ( or uncollectible accounts expense). Such losses are a normal and necessary risk of doing business on a credit basis. Two metohds are used in accouting for uncollectible accounts : 1 the direct write off method and 2 the allowance method.
the direct write off method for uncollectible accounts
under the direct write off method, when a company determines a particular account to be uncollectible, it charges the loss to bad debt expense. Assume, for example, that on December 10 Cruz co. writes off as uncollectible yusado’s 8000 balance.
Allowance method for uncollectible accounts
The allowance method of accounting for bad debts involves estimating uncollectible accounts at the end of each period. This provides a better measure of income. It also ensures that companies state receivables on the statement of financial position at their cash realizable value
Ifrs requires the allowance method for financial reporting purposes when bad debts are material in amount. This method has three essential features :
1. Companies estimate uncollectible accounts receivable. They record this estimated expense in the same accounting period in which they record the revenue
2. Companies debit estimated uncollectibles to bad debt expense and credit them to allowance for doubtful accounts ( a contra asset account) through an adjusting entry at the end of each period
3. When companies write off a specific account, they debit actual uncollectibles to allowance for doubtful accounts and credit that amount to accounts receivables
Recording estimated uncollectibles
Recording the write off of an uncollectible account
Recovery of an uncollectible account
Bases used for allowance method
Two bases are used to determine this amount, 1 percentage of sales and percentage of receivable
Percentage of sales (income statement) approach. In the percentage of sales approach, management estimates what percentage of credit sales will be uncollectible. This percentage is based on past experience and anticipated credit policy
Percentage of receivables ( statement of financial position) approach. Using past experience, a company can estimate the percentage of its outstanding receivables that will become uncollectible, without identifying specific accounts.
Recognition of notes receivable
Companies generally record short term notes at face value (less allowances), ignoring the interest implicit in the maturity value. A general rule is that notes treated as cash equivalents (maturities of three months or less and easily converted to cash) are not subject to premium or discount amortization due to materiality considerations)
Valuation of notes receivable
The computations and estimations involved in valuing short term notes receivable and in recording bad debt expense and the related allowance exactly parallel that for trade accounts receivable. As a result, companies often use one of the collective assessment methods (percentage of sales or percentage of receivables) to measure possible impairments
Long term receivables, however, often involve additional estimation problems. For example the value of a note receivable may change over time as a discount or premium is amortized. In addition, because these receivables are outstanding for a number of periods, significant differences between fair value and amortized cost often result. In the case of long term notes receivable, impairment tests are often done on an individual assessment basis rather than on a collective assessment basis. In this situation, impairment losses are measured as the difference between the carrying value of the receivable and the present value of the estimate future cash flows discounted at the original effective interest rate
Fair value option
Fair value measurement
If companies choose the fair value option, receivables are recorded at fair value, with unrealized holding gains or losses reported as part of net income. An unrealized holding gain or loss is the net change in the fair value of the receivable from one period to another, exclusive of interest revenue recognized but not recorded. As a result, the company reports the receivable at fair value each reporting date. In addition, it reports the change in value as part of net income
Companies may elect to use the fair value option at the time the receivable is originally recognized or when some event triggers a new basis of accounting. If a company elects the fair value option for a receivable, it must continue to use fair value measurement for that receivable until the company no longer owns this receivables. If the company does not elect the fair value option for a given receivable at the date of recognition, it may not use this option on that specific receivable in subsequent periods
Recording fair value option
Derecognition of receivables
Tranfers of receivables
The transfer of receivables to a third party for cash happens in one of two ways
1 secured borrowing
2 sales of receivables
Sale without guarantee
When buying receivables, the purchaser generally assumes the risk of collectibilty and absorbs any credit losses. A sale of this type is often referred to as a sale without guarantee (without recourse) against credit loss. The transfer of receivables in this case is an outright sale of the receivables both in form and substance. As in any sale of assets, the seller debits cash for the proceeds and credits accounts receivable for the face value of the receivables. The seller recognizes the difference, reduced by any provision for probable adjustments (discount, returns, allowances, etc) as a loss on sale receivables. The seller uses a due from factor account to account for the proceeds retained by the factor to cover probable sales discounts, sales returns, and sales allowances
Sale with guarantee
To illustrate a sale of receivables with guarantee against credit loss, assume that crest textiles issues a guarantee to commercial factors to compensate commercial factors for any credit losses on receivables transferred. In this situation, the question is whether the risks and rewards of ownership are transferred to commercial factors or remain with with crest textile. Im other words, is it to be accounted for as a saleor a borrowing
In this case, given that there is a guarantee for all defaults, it appears that the risks and rewards of these receivables still remain with crest textiles. As a result, the transfer is considered a borrowing sometimes referred to as a failed sale. Crest textiles continues to recognize the receivable on its books, and the transaction is treated as a borrowing.
The general rules in classifying receivables are
1. Segregate and report the carrying amounts of the different categories of receivables
2. Indicate the receivables classified as current and non current in the statement of financial position
3. Appropriately offset the valuation accounts for receivables that are impaired , including a discussion of individual and collectively determined impairments
4. Disclose the fair value of receivables in such a way that permits it to be compared with its carrying amount
5. Disclose information to assess the credit risk inherent in the receivables by providing information on :
a. Receivables that are neither past due nor impaired
b. The carrying amount of receivables that would otherwise be past due or impaired, whose terms have been renegotiated
c. For receivables that are either past due or impaired, disclose an analysis of the age of the receivables that are past due as of the end of the reporting period

Hasil (Belanda) 1:

Bijzondere waardevermindering evaluatie proces reële waarde optieNiet langer opnemen van tegoedenVorderingen worden ook financiële activa, ze zijn ook een financieel instrument. Vorderingen (vaak aangeduid als leningenenvorderingen) worden vorderingen gehouden tegen klanten en andere voor geld, goederen of dienstenOninbare rekeningen reveivableHelaas, deze situatie vaak treedt niet op. Bijvoorbeeld, kan een klant niet kunnen betalen vanwege een daling van de omzet als gevolg van een teruggang in de economie. Ook kunnen particulieren worden ontslagen uit hun baan of geconfronteerd met onverwachte ziekenhuisrekeningen. Bedrijven opnemen kredietverliezen als afschrijvingen op slechte schulden last (of oninbare rekeningen kosten). Deze verliezen zijn een gebruikelijke en noodzakelijke risico van zakendoen op basis van krediet. Twee metohds worden gebruikt in Accounting voor oninbare accounts: 1 de direct afschrijven van methode en 2 de uitkering-methode.de directe schrijven uit methode voor oninbare accountsonder de directe schrijven uit de methode, wanneer een bedrijf een bepaalde account oninbare, bepaalt laadt het het verlies aan slechte schulden kosten. Stel, bijvoorbeeld, dat op 10 December Cruz co. af als oninbare yusado van 8000 evenwicht schrijft.Uitkering methode voor oninbare accountsDe methode van de vergoeding voor de financiële verslaggeving voor dubieuze debiteuren omvat schatten van oninbare rekeningen aan het einde van elke periode. Dit biedt een betere maatstaf van het inkomen. Het zorgt er ook voor dat ondernemingen staat vorderingen over de verklaring van de financiële positie tegen hun contante realiseerbare waardeIfrs requires the allowance method for financial reporting purposes when bad debts are material in amount. This method has three essential features :1. Companies estimate uncollectible accounts receivable. They record this estimated expense in the same accounting period in which they record the revenue2. Companies debit estimated uncollectibles to bad debt expense and credit them to allowance for doubtful accounts ( a contra asset account) through an adjusting entry at the end of each period3. When companies write off a specific account, they debit actual uncollectibles to allowance for doubtful accounts and credit that amount to accounts receivablesRecording estimated uncollectiblesRecording the write off of an uncollectible accountRecovery of an uncollectible accountBases used for allowance methodTwo bases are used to determine this amount, 1 percentage of sales and percentage of receivablePercentage of sales (income statement) approach. In the percentage of sales approach, management estimates what percentage of credit sales will be uncollectible. This percentage is based on past experience and anticipated credit policyPercentage of receivables ( statement of financial position) approach. Using past experience, a company can estimate the percentage of its outstanding receivables that will become uncollectible, without identifying specific accounts.Recognition of notes receivableCompanies generally record short term notes at face value (less allowances), ignoring the interest implicit in the maturity value. A general rule is that notes treated as cash equivalents (maturities of three months or less and easily converted to cash) are not subject to premium or discount amortization due to materiality considerations)Valuation of notes receivableThe computations and estimations involved in valuing short term notes receivable and in recording bad debt expense and the related allowance exactly parallel that for trade accounts receivable. As a result, companies often use one of the collective assessment methods (percentage of sales or percentage of receivables) to measure possible impairmentsLong term receivables, however, often involve additional estimation problems. For example the value of a note receivable may change over time as a discount or premium is amortized. In addition, because these receivables are outstanding for a number of periods, significant differences between fair value and amortized cost often result. In the case of long term notes receivable, impairment tests are often done on an individual assessment basis rather than on a collective assessment basis. In this situation, impairment losses are measured as the difference between the carrying value of the receivable and the present value of the estimate future cash flows discounted at the original effective interest rateFair value option
Fair value measurement
If companies choose the fair value option, receivables are recorded at fair value, with unrealized holding gains or losses reported as part of net income. An unrealized holding gain or loss is the net change in the fair value of the receivable from one period to another, exclusive of interest revenue recognized but not recorded. As a result, the company reports the receivable at fair value each reporting date. In addition, it reports the change in value as part of net income
Companies may elect to use the fair value option at the time the receivable is originally recognized or when some event triggers a new basis of accounting. If a company elects the fair value option for a receivable, it must continue to use fair value measurement for that receivable until the company no longer owns this receivables. If the company does not elect the fair value option for a given receivable at the date of recognition, it may not use this option on that specific receivable in subsequent periods
Recording fair value option
Derecognition of receivables
Tranfers of receivables
The transfer of receivables to a third party for cash happens in one of two ways
1 secured borrowing
2 sales of receivables
Sale without guarantee
When buying receivables, the purchaser generally assumes the risk of collectibilty and absorbs any credit losses. A sale of this type is often referred to as a sale without guarantee (without recourse) against credit loss. The transfer of receivables in this case is an outright sale of the receivables both in form and substance. As in any sale of assets, the seller debits cash for the proceeds and credits accounts receivable for the face value of the receivables. The seller recognizes the difference, reduced by any provision for probable adjustments (discount, returns, allowances, etc) as a loss on sale receivables. The seller uses a due from factor account to account for the proceeds retained by the factor to cover probable sales discounts, sales returns, and sales allowances
Sale with guarantee
To illustrate a sale of receivables with guarantee against credit loss, assume that crest textiles issues a guarantee to commercial factors to compensate commercial factors for any credit losses on receivables transferred. In this situation, the question is whether the risks and rewards of ownership are transferred to commercial factors or remain with with crest textile. Im other words, is it to be accounted for as a saleor a borrowing
In this case, given that there is a guarantee for all defaults, it appears that the risks and rewards of these receivables still remain with crest textiles. As a result, the transfer is considered a borrowing sometimes referred to as a failed sale. Crest textiles continues to recognize the receivable on its books, and the transaction is treated as a borrowing.
The general rules in classifying receivables are
1. Segregate and report the carrying amounts of the different categories of receivables
2. Indicate the receivables classified as current and non current in the statement of financial position
3. Appropriately offset the valuation accounts for receivables that are impaired , including a discussion of individual and collectively determined impairments
4. Disclose the fair value of receivables in such a way that permits it to be compared with its carrying amount
5. Disclose information to assess the credit risk inherent in the receivables by providing information on :
a. Receivables that are neither past due nor impaired
b. The carrying amount of receivables that would otherwise be past due or impaired, whose terms have been renegotiated
c. For receivables that are either past due or impaired, disclose an analysis of the age of the receivables that are past due as of the end of the reporting period

Hasil (Belanda) 3:

Bijzondere procedures voor de beoordeling van de reële waarde van de optie.De erkenning van de vorderingenVorderingen en financiële activa is ook een van de financiële instrumenten.Debiteuren (meestal van leningen en vorderingen) tegen de klant en de andere als geld, goederen of diensten van de vorderingen dieNiet kunnen herstellen van de rekeningenHelaas is de situatie niet vaak gebeurt.Bijvoorbeeld, een klant mag niet worden betaald, want het is de daling van de verkoop, als gevolg van de economische neergang.Evenzo, persoonlijk kan worden ontslagen of met de medische kosten van ongevallen.Een record van kredietverliezen debitering, dubieuze vorderingen (of verlies van schulden).Dit verlies is op grond van het krediet op de normale zaken doen en onnodige risico "s.Voor twee metohds schulden: 1% van rechtstreekse afschrijving en de toelagen voor 2.Afschrijving van schulden van de directe methodeIn de directe methode, wanneer een onderneming besluit een specifieke rekeningen niet kunnen worden teruggevorderd, en het verlies van de kosten, de kosten van schulden.Als, bijvoorbeeld, op 10 december, Cruz. Yusado kwijtschelding van schulden van 8000 evenwicht.Voorziening voor dubieuze debiteuren.Voorziening voor dubieuze debiteuren van de vergoedingen aan het einde van de raming van methoden, met inbegrip van de schulden.Dit biedt een beter inkomen maatregelen.Het zorgt er ook voor dat de ondernemingen debiteuren in het overzicht van de financiële positie van de realiseerbare waardeInternationale standaarden voor financiële verslaglegging voor de uitkering van de financiële verslagen van de methode, wanneer het bedrag van de schuld is groot.Deze methode heeft drie fundamentele elementen:1.Verwacht wordt dat de oninbare vorderingen.Ze in dezelfde verslagperiode opgenomen van een raming van de kosten van het inkomen, en geregistreerd2.Verwacht wordt dat de kosten van oninbare schulden en de debitering van de schulden (een krediet van hun activa afgedekt door aanpassing van de ingang in de rekeningen) aan het einde van elke periode3.Wanneer een bedrijf om een specifiek rekening houdt met de werkelijke, hun schulden niet verzameld en krediet bedrag rekening gedebiteerd debiteurenUncollectibles opgenomen ramingRegistratie van de kwijtschelding van schuldenEen herstel van de slechte schuldenDe grondslagen voor de berekening van de vergoedingHet gebruik van twee basis, met het oog op de vaststelling van het bedrag van de verkoop van 1%, en het percentage van de debiteurenPercentage van de verkoop (winst - en verliesrekening).In een percentage van de omzet, het beheer van de kredieten te schatten hoeveel percentage van de verkoop zal niet worden ingetrokken.Dit percentage is in het licht van de opgedane ervaring en de verwachte krediet beleidPercentage van de vorderingen (balans).Door gebruik te maken van de ervaringen uit het verleden, een raming van de te ontvangen bedragen, kan het percentage zal trekken, niet specifiek rekening.Neemt nota van de vorderingen.Bedrijven in het algemeen zullen gegevens aantekening (niet op korte termijn te belastingvrije), maar niet in de waarde van de impliciete rente verschuldigd.De algemene regel is dat Bill beschouwd als kasequivalenten (van drie maanden of minder gemakkelijk worden omgezet in contanten) niet onder de afschrijving van kortingen of premies, aangezien belangrijke overwegingen)Neemt nota van de vorderingen van de beoordelingBij de beoordeling van de kosten en de registratie van schulden op korte termijn vorderingen en de daarmee samenhangende vergoedingen berekeningen en ramingen van de debiteuren, en geheel parallel lopen.Dus, de ondernemingen vaak gebruik maken van een collectieve beoordeling (percentage van de verkoop of de percentages voor het meten van de vorderingen mogelijk schade)Echter, de vorderingen op lange termijn met betrekking tot de raming van de extra zijn.Bijvoorbeeld, de waarde van bankbiljetten kan veranderen in de loop van de tijd, de afschrijving van kortingen of premies.Bovendien, als gevolg van de debiteuren van de cycli van de uitstaande, aanzienlijke verschillen leiden vaak tot de reële waarde en de geamortiseerde kostprijs.In geval van vorderingen op lange termijn, op bijzondere waardevermindering is meestal op basis van die evaluatie, en niet op basis van de in de collectieve evaluatie van.In dit geval is voor het meten van de vorderingen van een bijzonder waardeverminderingsverlies de boekwaarde en de contante waarde van de geschatte toekomstige kasstromen die nu de oorspronkelijke effectieve rente van de verschillen tussen deDe mogelijkheid van waardering tegen reële waardeWaardering tegen reële waardeAls de keuze van de mogelijkheid van waardering tegen reële waarde en de debiteuren tegen reële waarde opgenomen, en niet de verwezenlijking van een verslag van een deel van de winst - en verliesrekening netto - inkomen.De verwezenlijking van een winst - en verliesrekening niet de netto verandering van de reële waarde van de vorderingen van een periode naar een andere, exclusief rente - inkomsten erkend maar heeft geen strafblad.Het resultaat is van de co - rapporteur, de vorderingen in de reële waarde van elke datum van het verslag.Bovendien, het verslag van de netto - inkomsten van de netto - inkomsten van de verandering, als onderdeel van eenDe ondernemingen kunnen kiezen gebruik te maken van de reële waarde van de optie in de boekhouding als oorspronkelijk is erkend, of