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The attention on cases of impairment has generally been reduced, but this is expected to increase with the more emphasis placed on financial analysis and audits, a need generated by the contemporaneous economic crisis (Wayman, 2009). As an addition then, there have been developed complementary regulations. IFRS 3 for instance, states that while amortisation tests will not be conducted, impairments tests will still be performed. IAS 39 states that the interest income related to impaired credits would be recognized starting with 2005; more net present value calculation on impaired loans will be conducted (Nordea, 2005).
Impairment can be observed when the issuer encounters severe financial difficulties; he breaks the contractual terms with his partners; he becomes involved in dubious borrowing; it becomes likely that the company will declare bankruptcy or will be purchased by another entity; observation of financial statements. Impairment is generally measured with the aid of assets at amortised costs, assets compared to portfolio basis impairment, analysis of interest income on impaired assets, assets carried at cost or assets to be sold by the company. It can be reversed if the impairment decreases and if this decrease can be related to an event after impairment was recognized (Website of PricewaterhouseCoopers, 2009). Just like off-balance-sheet financing, impairment reduces the trust in the organization's financial statements.
References
Wayman, R., 2009, Impairment Charges: The...
Ast accessed on February 6, 2009
References
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