Impairment: Accounting for Incurred Losses under IAS 39
Issue
The IFRIC considered whether under IAS 39 an entity should recognise an impairment on a group of loans if its loss expectation at initial recognition of the loans has not changed, but the entity could estimate reliably, based on past history, that loss events occurred after initial recognition, but before the reporting date.
Decision not to add
October 2004
Reason
The IFRIC considered whether under IAS 39 an entity should recognise an impairment on a group of loans if its loss expectation at initial recognition of the loans had not changed, but the entity could estimate reliably, based on past history, that loss events occurred after initial recognition, but before the reporting date.
The IFRIC agreed that the interpretation of the Standard was clear and that an entity should recognise such an incurred impairment loss that is supported by objective evidence, which might not have been reported before the entity’s reporting date. However, an impairment loss could not be recognised if relevant events had not been recognised. The IFRIC recommended that the IASCF education team should consider this issue for possible inclusion in educational material.
IFRIC reference: IAS 39