Page 441 - SBR Integrated Workbook STUDENT S18-J19

Answers

Example 9

Credit impaired financial asset

The financial asset is initially recognised at fair value plus fees of $4.1 million.
It is then measured at amortised cost as follows:

Bfd Interest at 8% Cash receipt* Cfd
$m $m $m $m
4.1 0.33 (0.2) 4.23

* = $4m × 5%

Interest income of $0.33 million is recorded in profit or loss. The asset, prior to
impairment, is carried at $4.23 million.

The issuer is now in administration so the asset is credit impaired. A loss
allowance must be recognised for the difference between $4.23 million and
the present value of the expected cash receipts.

2
The present value of the expected receipts is $1.71 million ($2m × 1/1.08 ).
The required loss allowance is $2.52 million. This will be charged to profit or
loss. The asset will have a net carrying amount of $1.71 million on the
statement of financial position.

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