Scribd Logo
Upload

Welcome to Scribd!

  • 273 views

    Review Materials: Prepared By: Junior Philippine Institute of Accountants UC-Banilad Chapter F.Y. 2019-2020

    Uploaded by

    AB Cloyd
    This document provides an overview of additional concepts related to receivables, including: 1. Loans receivable can have direct origination costs added to the carrying amount, while indirect costs are expensed. Origination fees are deducted from the carrying amount. 2. The expected credit loss model uses a general approach involving three stages to assess impairment based on changes in credit risk since initial recognition. 3. A simplified approach is used for trade receivables and contract assets to always measure loss allowance as lifetime expected credit losses. 4. Receivables can be derecognized when contractual rights to cash flows expire or assets are transferred qualifying for derecognition. Offsetting of assets and li

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Review Materials: Prepared By: Junior Philippine Institute of Accountants UC-Banilad Chapter F.Y. 2019-2020

    Uploaded by

    AB Cloyd
    273 views14 pages
    This document provides an overview of additional concepts related to receivables, including: 1. Loans receivable can have direct origination costs added to the carrying amount, while indirect costs are expensed. Origination fees are deducted from the carrying amount. 2. The expected credit loss model uses a general approach involving three stages to assess impairment based on changes in credit risk since initial recognition. 3. A simplified approach is used for trade receivables and contract assets to always measure loss allowance as lifetime expected credit losses. 4. Receivables can be derecognized when contractual rights to cash flows expire or assets are transferred qualifying for derecognition. Offsetting of assets and li

    Original Description:

    Study hard and excel in life!

    Original Title

    Receivable (Additional Concepts) Reviewer

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    This document provides an overview of additional concepts related to receivables, including: 1. Loans receivable can have direct origination costs added to the carrying amount, while indirect costs are expensed. Origination fees are deducted from the carrying amount. 2. The expected credit loss model uses a general approach involving three stages to assess impairment based on changes in credit risk since initial recognition. 3. A simplified approach is used for trade receivables and contract assets to always measure loss allowance as lifetime expected credit losses. 4. Receivables can be derecognized when contractual rights to cash flows expire or assets are transferred qualifying for derecognition. Offsetting of assets and li

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    273 views14 pages

    Review Materials: Prepared By: Junior Philippine Institute of Accountants UC-Banilad Chapter F.Y. 2019-2020

    Uploaded by

    AB Cloyd
    This document provides an overview of additional concepts related to receivables, including: 1. Loans receivable can have direct origination costs added to the carrying amount, while indirect costs are expensed. Origination fees are deducted from the carrying amount. 2. The expected credit loss model uses a general approach involving three stages to assess impairment based on changes in credit risk since initial recognition. 3. A simplified approach is used for trade receivables and contract assets to always measure loss allowance as lifetime expected credit losses. 4. Receivables can be derecognized when contractual rights to cash flows expire or assets are transferred qualifying for derecognition. Offsetting of assets and li

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 14

    Review Materials

    Prepared by:
    Junior Philippine Institute of
    Accountants UC-Banilad Chapter
    F.Y. 2019-2020
    Receivables: Additional
    Concepts
    Loans Receivable

    • Receivables are initially recognized at fair value plus transaction costs


     Direct Origination Costs are added to the carrying amount of a loan receivable. Indirect
    Origination Costs are expensed when incurred.

     Origination Fees are deducted from the carrying amount of a loan receivable.

    Impairment
    The expected credit loss model (ECL)

    Type of Asset/exposure Approach


    1. Trade receivables, contract assets and • Simplified approach
    lease receivables
    2. Originated or purchased credit- • Changes in lifetime expected credit
    impaired financial assets losses approach
    3. Other assets/exposure • General approach (i.e.,’three-stage’ or
    ‘three-bucket approach)
    3
    General approach

    Stage 1 Stage 2 Stage 3

    • Credit risk has not • Credit risk has increased • Credit risk has increased
    increased significantly significantly since initial significantly since initial
    since initial recognition. recognition. recognition plus there is
    • ‘Low credit risk’ objective evidence of
    expediency impairment

     Recognize 12-month  Recognized Lifetime • Recognized Lifetime


    expected credit expected credit expected credit
    losses losses losses

     Interest revenue is  Interest revenue is • Interest revenue is


    computed on the gross computed on the gross computed on the net
    carrying amount of the carrying amount of the carrying amount (i.e.,
    asset asset gross carrying amount
    less loss allowances)
    Change in credit risk since initial recognition
    IMPROVEMENT DETERIORATION
    4
    Definition of terms
    ▪ Loss Allowance – is the allowance for expected credit losses on financial assets that are
    within the scope of the impairment requirement of PFRS 9.

    ▪ Expected Credit Losses – is the weighted average of all credit losses with the respective
    risks of a default occurring as the weights.

    ▪ Credit loss – is the difference between all contractual cash flows that are due to an entity in
    accordance with the contract and all the cash flows that the entity expects to receive (i.e., all
    cash shortfalls), discounted at the original effective interest rate (or credit-adjusted effective
    interest rate purchased or originated credit-impaired financial assets).

    ▪ 12-month expected credit losses – The portion of lifetime expected credit losses that
    represent the expected credit losses that result from default events on a financial instruments
    that are possible within the 12 months after the reporting date.

    ▪ Credit risk – The risk that one party to a financial instrument will cause a financial loss for
    the other party by failing to discharge an obligation.

    ▪5 Lifetime Expected credit losses – The expected credit losses that result from all possible
    default events over the expected life of a financial instrument
    Simplified Approach

    ▪ An entity shall always measure the loss allowance at amount equal to lifetime
    expected credit losses for its trade receivables or contract assets that do not
    contain a significant financing component

    ▪ Examples: Provision matrix and Single loss rate

    6
    Derecognition of Receivables

    • Financial assets are derecognized when:

    a) the contractual rights to the cash flows from the financial asset expire; or
    b) the financial assets are transferred and the transfer qualities for derecognition.

    ▪ Derecognition (of a financial instrument) means the removal of a previously recognized


    financial asset or financial liability from an entity’s financial statement of financial
    position.

    7
    Evaluation of transfers of receivables

    ▪ If control over the receivable is:

    a)Substantially transferred, the receivable is derecognized.


    b)Substantially retained, the receivable is not derecognized but continued to be recognized.
    Any cash received from the transfer is recognized as liability.

    c) Partially transferred and partially retained, the portion transferred is derecognized


    while the portion retained is continued to be recognized.

    8
    Offsetting of financial assets and financial
    liabilities

    ▪ A financial asset and financial liability shall be offset and the net amount presented in the
    statement of financial position only when both of the following conditions are met:

    a) The entity currently has a legally enforceable right to set off the recognized
    amounts: and

    b)The entity intends either to settle on a net basis, or to realize the asset and settle the
    liability simultaneously.

    9
    Receivable Financing

    1. Pledge (hypothecation)
    Receivables are used as collateral security for loans. Pledge does not qualify as
    transfer of financial assets for derecognition because the pledgor/borrower retains
    control over the pledged receivables. Therefore, receivables pledged are neither
    derecognized nor specifically identified from other receivables.

    2. Assignment
    Is a formal form of pledge wherein the receivables assigned or used as collateral
    security for borrowing are specifically identified and stated in the loan contract.

    a. Notification basis
    debtors whose receivables have been assigned are notified of
    the assignment
    b. Non-notification basis
    Debtors whose receivables have been assigned are not notified of the
    assignment.

    10
    Receivable Financing

    3. Factoring
    -Instead of borrowing money and pledging or assigning the receivables as collateral
    security, entities will sometime s sell the receivables to a financial institution
    known as “factor”.
    -is usually done on a notification basis and either on a without recourse or with
    recourse basis.

    4. Discounting
    ▪ NP = MV – D
    ▪ MV = P + i
    ▪ D = MV x Dr x Dp
    ▪ Dr = Discount Rate
    ▪ Dp= Discount period (the unexpired term of the note)
    ▪ Interest Income = interest accrued on the expired term of the note

    11
    End of Topic
    Please see complementary test bank for
    practice problems and theories.

    12
    Dear, you.
    Always be in pursuit for
    the one you have not yet
    become. Keep going!
    Love,
    Your UCB-JPIA family

    13
    Reference:

    Alimoda, A. (2019). Chapter 6 Receivables-Additional Concepts.


    Retrieved on August 8, 2020 from
    https://www.scribd.com/presentation/419670624/Chapter-6-
    Receivables-Additional-Concepts 14

    You might also like