IFRS Requirements for Recognizing Impairment on Securities

BY THOMAS G. REES AND KENNETH F. FICK

Given the movement toward acceptance of IFRS in the U.S., a discussion about other-than-temporary impairment on securities would not be complete without a discussion of the IFRS requirements.

           

IFRS requirements for recognizing impairment on securities are specified in International Accounting Standard no. 39, Financial Instruments: Recognition and Measurement. IAS 39 addresses a wide range of accounting issues relevant to financial instruments, including securities, loans, derivatives and liabilities.

           

IAS 39 requires entities to assess whether impairment exists at each balance sheet date. While the decision to recognize an impairment loss is also based on subjective criteria, the IFRS impairment rules are quite different from U.S. GAAP.  For example, under IFRS, the “other-than-temporary” concept is not considered, assets may be evaluated in groups and there is a different threshold for recognizing impairment. Specifically, paragraph 59 indicates that an impairment should be recognized only if “there is objective evidence of impairment as a result of one or more events” and the “loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.”

           

In addition, IAS 39 permits an entity to use a valuation reserve account when recognizing impairment and to reverse recognition of an impairment loss in a subsequent period, if certain criteria are met. These rules are considerably less stringent than current U.S. GAAP requirements.

 

 

SPONSORED REPORT

How to make the most of a negotiation

Negotiators are made, not born. In this sponsored report, we cover strategies and tactics to help you head into 2017 ready to take on business deals, salary discussions and more.

VIDEO

Will the Affordable Care Act be repealed?

The results of the 2016 presidential election are likely to have a big impact on federal tax policy in the coming years. Eddie Adkins, CPA, a partner in the Washington National Tax Office at Grant Thornton, discusses what parts of the ACA might survive the repeal of most of the law.

QUIZ

News quiz: Scam email plagues tax professionals—again

Even as the IRS reported on success in reducing tax return identity theft in the 2016 season, the Service also warned tax professionals about yet another email phishing scam. See how much you know about recent news with this short quiz.