Financial instruments – Impairment

Date recorded:

Definition of the term 'write-off'

The Boards discussed the definition of the term 'write-off'. Each Board's original exposure draft defined 'write-off' and the definitions were largely similar although the IASB's definition included that "the entity has ceased any further enforcement activities". The IASB included that phrase in their definition as they were told by financial statement users that information on amounts that could still be recovered after being written-off was important information. As a result, the IASB's definition of a write-off extended the period when a balance could be written off so that information about potential recoveries continued to be reported in the required disclosures. However, responses to the financial statement user questionnaire on the IASB's original exposure draft noted that users believe a loss should be written off when it is incurred, regardless if the legal means of recovery have not expired.

The Boards tentatively agreed to provide a definition in the defined terms that a write off is "a direct reduction of the amortised cost of a financial asset resulting from uncollectibility". Additionally, the Boards tentatively agreed to include guidance that an asset is considered uncollectible if the entity has no reasonable expectation of recovery and therefore an asset should be written off, partially or fully, in the period in which the entity has no reasonable expectation of recovery.

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