- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 1. Introduction to Financial Statement Analysis
- Subject 4. Comparison of IFRS with Alternative Financial Reporting Systems
CFA Practice Question
A company has receivables resulting from trades with a client. The client has already filed a petition for insolvency. According to IFRS, the receivables ______ be recognized on the balance sheet.
B. should not
A. should
B. should not
Correct Answer: B
The value of the receivables can be measured with reliability. (Fulfillment of reliability of measurement.) But it is not probable (p < 50%) that the customer will repay the debt (probability of future economic benefit is not fulfilled). Therefore, recognition of the receivables on the balance sheet won't be allowed. If the receivable has already been shown in the balance sheet (in a former fiscal year), there is an impairment loss to be recognized under IFRS.
User Contributed Comments 4
| User | Comment |
|---|---|
| johntan1979 | Going concern principle |
| Shaan23 | What about US GAAP? What happens there? |
| Freddie33 | Impairment loss? What's that? |
| walterli | Allowance for bad debts |