CFA Practice Question

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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.

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
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