Question

What are the rules for disclosing of impaired loans?

Please NO PLAGIARISM

Answer 1

Impaired loan

A loan is considered to be impaired when it is probable that the lender not likely to collect all of the related principal and interest payments.

Example; a loan is impaired when it is probable that the bank will be unable to collect all amounts due (including both Principal and Interest) according to the contractual terms of the loan agreement.

According to IFRS 7 entities required to provide disclosures in their financial statements that enable users to evaluate:

Disclosures about impaired loans including

1. The total recorded investment in impaired loans;
2. The average recorded investment in the impaired loans during the period; and
3. The policy for interest income recognition on impaired loans including how cash receipts are recorded;
4. The details of the activity in the allowance for credit losses.