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Which of the following statements are INCORRECT with regards to impairment of financial instruments; Select ALL that apply.
Suggested Answer: A, B
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32 comments · newest first
FA
Fabiola
11 months ago
Wait, are held to maturity instruments really measured at amortised cost? That seems off!
BE
Berry
11 months ago
E sounds correct to me, but I could be wrong.
AL
Alease
11 months ago
C is a valid point, but I don't think it's always a sign of impairment.
KE
Kent
12 months ago
I thought D was right, but now I'm not so sure.
SA
Salley
12 months ago
A and B are definitely incorrect.
RE
Rebecka
12 months ago
For statement D, I believe it’s true that the carrying amount is reduced directly or through an allowance, but I’m not sure if that applies to all types of financial instruments.
DA
Dahlia
1 year ago
I practiced a similar question where a breach of contract indicated impairment, so I think statement C could be correct, but I need to double-check.
HE
Hermila
1 year ago
I think statement B is tricky; I recall that we write down assets to fair value only if there's a loss, but I'm not completely confident about the specifics.
AR
Aretha
1 year ago
I remember that held to maturity instruments are usually measured at amortised cost, but I'm not sure if they are impacted by impairment like available for sale assets.
CO
Cordell
1 year ago
I'm a bit unsure about the details on how impairment losses are recognized. I'll need to think through that carefully before answering.
WI
Wilda
1 year ago
This is a good opportunity to showcase my knowledge of financial instrument impairment. I feel confident I can select the incorrect statements accurately.
SO
Sonia
1 year ago
Okay, I've got this. The key is identifying which statements are incorrect regarding impairment. I'll methodically go through each option and evaluate whether it's right or wrong.
FL
Florencia
1 year ago
Hmm, I'm a bit confused on the distinction between amortized cost and fair value measurement for impairment. I'll need to re-read that section in my notes to make sure I understand it properly.
VI
Vilma
1 year ago
This question looks tricky, but I think I can tackle it. I'll need to carefully review the key differences between held-to-maturity, available-for-sale, and other financial instrument categories.
MA
Margarett
2 years ago
E is the correct answer. I'm going to need a calculator the size of a small country to figure out those present value calculations.
GW
Gwen
2 years ago
D is correct. Impairment losses can be recorded directly against the asset or through an allowance account. Either way, the accountant's job is to make the numbers look as ugly as possible.
EN
Enola
2 years ago
E) The impairment loss on held to maturity instruments is the difference between the assets carrying amount and the present value of its future cashflows.
DO
Dorian
2 years ago
C) If a contract relating to a financial instrument is breached then this might be an indication of impairment.
ME
Melissa
2 years ago
B) If a loss is suspected following an impairment review, a financial asset is written down to its fair value.
MA
Martin
2 years ago
A) Held to maturity instruments and available for sale assets are both measured at amortised cost and are therefore impacted by impairment.
MA
Maia
2 years ago
C is correct. A breach of contract can be an indication of impairment. Looks like someone's been slacking off on their loan payments!
CR
Cristy
2 years ago
C) If a contract relating to a financial instrument is breached then this might be an indication of impairment.
CA
Cammy
2 years ago
A) Held to maturity instruments and available for sale assets are both measured at amortised cost and are therefore impacted by impairment.
CH
Cheryl
2 years ago
B is incorrect. If a loss is suspected, the asset should be written down to its recoverable amount, not its fair value.
IZ
Izetta
2 years ago
A is incorrect. Held to maturity instruments are not measured at amortised cost, they are measured at cost less impairment.
IZ
Izetta
2 years ago
B is incorrect. The asset should be written down to its recoverable amount, not its fair value.
LY
Lynelle
2 years ago
I believe statement C is incorrect because a breached contract is not necessarily an indication of impairment.
PA
Paulina
2 years ago
A and E are correct. If a financial instrument is held to maturity, it should be measured at amortized cost and impacted by impairment. The impairment loss is the difference between the carrying amount and the present value of future cash flows.
CA
Cassie
2 years ago
C) If a contract relating to a financial instrument is breached then this might be an indication of impairment.
RI
Rikki
2 years ago
B) If a loss is suspected following an impairment review, a financial asset is written down to its fair value.
MA
Marguerita
2 years ago
I disagree with you, Penney. Statement A is actually correct because both held to maturity instruments and available for sale assets are measured at amortised cost.
PE
Penney
2 years ago
I think statement A is incorrect because held to maturity instruments are not impacted by impairment.