Accounting Standards and Guidance

FRC Financial Reporting Standards (FRSs)

UK/Irish accounting framework (effective for periods beginning on or after 1 Jan 2015)

FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland

Section 11 Basic Financial Instruments

Section 11 – Subsequent measurement

Impairment of financial instruments measured at cost or amortised cost Recognition

At the end of each reporting period, an entity shall assess whether there is objective evidence of impairment of any financial assets that are measured at cost or amortised cost. If there is objective evidence of impairment, the entity shall recognise an impairment loss in profit or loss immediately.

Objective evidence that a financial asset or group of assets is impaired includes observable data that come to the attention of the holder of the asset about the following loss events:

significant financial difficulty of the issuer or obligor;

a breach of contract, such as a default or delinquency in interest or principal payments;

the creditor, for economic or legal reasons relating to the debtor's financial difficulty, granting to the debtor a concession that the creditor would not otherwise consider;

it has become probable that the debtor will enter bankruptcy or other financial reorganisation; and

observable data indicating that there has been a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, even though the decrease cannot yet be identified with the individual financial assets in the group, such as adverse national or local economic conditions or adverse changes in industry conditions.

Other factors may also be evidence of impairment, including significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment in which the issuer operates.

An entity shall assess the following financial assets individually for impairment:

all equity instruments regardless of significance; and

other financial assets that are individually significant.

An entity shall assess other financial assets for impairment either individually or grouped on the basis of similar credit risk characteristics.

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