1st time IFRS adoption.
What is the impact on IFRS 9 on Cash and Cash equivalents? Do I need to calculate Expected Credit LOSS(ECL) on cash? Cash equivalent?
How should ECL be calculated for Other receivable?
IFRS 9 on Cash and Cash equivalents
Re: IFRS 9 on Cash and Cash equivalents
ECL should be calculated for all financial assets at amortised cost, this includes bank deposits, but cash on hand is excluded from ECL calculation.
As for other receivables, it depends on whether they are financial assets. For example, tax receivables are often presented as other receivables but they are not financial assets and therefore ECL are not recognised.
I don't remember whether IFRS 1 has any specific reliefs when it comes to ECL so check that
As for other receivables, it depends on whether they are financial assets. For example, tax receivables are often presented as other receivables but they are not financial assets and therefore ECL are not recognised.
I don't remember whether IFRS 1 has any specific reliefs when it comes to ECL so check that
Re: IFRS 9 on Cash and Cash equivalents
What are the circumstances where you expect credit loss on cash?
Re: IFRS 9 on Cash and Cash equivalents
Bank deposits are financial receivables so it is possible to incur credit losses on them. It all depends on local law, but state guarantees in case of bank insolvency are capped at certain levels which most corporates easily exceed
Re: IFRS 9 on Cash and Cash equivalents
I'd be interested in the OP's scenario why he expects credit loss on cash. Are bank collapsing in your country?
Re: IFRS 9 on Cash and Cash equivalents
I see. Does it mean that you don't recognise any ECL on bank deposits in the UK?
Re: IFRS 9 on Cash and Cash equivalents
Theoretically you do have to calculate ECL on cash and cash equivalents, but in practice you may choose not to because the impact should be immaterial (a characteristic of a C&CE is that it should be subject to insignificant changes in value, and that includes credit risk). However, if a substantial part of your balance sheet classifies as cash equivalents (in the case of certain financial institutions), the impact may not be material at the single financial asset level but it can be material as a whole. In that case ECL on C&CE equivalents should be determined and recognised (certain banks do this).
Re: IFRS 9 on Cash and Cash equivalents
Well I guess in Latvia it is a must....