Page 178 - SBR Integrated Workbook STUDENT S18-J19
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Chapter 12
Worked example
An entity has a $1 million loan asset measured at amortised cost.
Credit risk is low at the year end. There is a 0.5% risk of default in the next 12
months and the entity estimates that 25% of the gross carrying amount of the
asset will be lost if default occurs.
The loss allowance is $1,250 (0.5% × 25% × $1m)
5.3 Simplifications
An entity can assume that there has not been a significant increase in the credit risk
of a financial asset if, at the reporting date, the level of credit risk is low.
In relation to trade receivables, an entity is allowed to choose to create an allowance
equal to lifetime expected credit losses.
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