Impairment of financial assets

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  1. In the case of purchased or originated credit-impaired financial assets, the ED states that rather than apply the two-stage approach, changes in lifetime expected credit losses since initial recognition are recognised directly in profit or loss. A credit loss allowance is not recognised on initial recognition. Why is a credit loss allowance not recognised on initial recognition?

  2. In 2011, the IASB and the FASB issued a joint supplement which proposed removing interest adjustment from the recognition of impairments and since then, the bodies have used this approach, which is the basis of the current ED. However,the FASB have recently published its own proposed model. What is the key difference between the IASB`s proposals and those of the FASB?

  3. How are expected credit losses determined under the ED?

  4. The ED applies to various financial assets measured at amortised cost and at fair value through other comprehensive income under IFRS 9 Financial Instruments. Which of the following financial instruments does the ED not apply to?

  5. The International Accounting Standards Board (IASB) has published a proposal for a new accounting model for impairment of financial assets. Currently IAS 39, Financial Instruments: Recognition and Measurement, states that a financial instrument is impaired and impairment losses are incurred if a loss event occurred and this loss event had a reliably measurable impact on the future cash flows. Which of the following approaches is the recommended new accounting model for impairment of financial assets?