Difference between revisions of "Credit-Impaired Financial Asset"
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* The purchase or origination of a financial asset at a deep [[Discount]] that reflects the incurred [[Credit Loss]] | * The purchase or origination of a financial asset at a deep [[Discount]] that reflects the incurred [[Credit Loss]] | ||
+ | == Issues and Challenges == | ||
+ | It may not be possible to identify a single discrete event - instead, the combined effect of several events may have caused financial assets to become credit-impaired. | ||
− | + | == See Also == | |
+ | * [[NPL Glossary]] | ||
== References == | == References == | ||
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[[Category:Measurement]] | [[Category:Measurement]] | ||
+ | [[Category:NPL]] |
Latest revision as of 13:06, 16 September 2021
Definition
A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred.
Informally credit-impaired assets are also denoted Stage 3 Assets
Evidence of Impairment
Evidence that a financial asset is credit-impaired includes observable data about the following events[1]:
- Significant Financial Difficulty of the issuer or the borrower
- A Breach of Contract, such as a Default or Past Due event
- The Lender(s) of the Borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, have granted to the borrower a concession(s) that the lender(s) would not otherwise consider
- It is becoming probable that the borrower will enter Bankruptcy or other financial reorganisation
- The disappearance of an Active Market for that financial asset because of financial difficulties
- The purchase or origination of a financial asset at a deep Discount that reflects the incurred Credit Loss
Issues and Challenges
It may not be possible to identify a single discrete event - instead, the combined effect of several events may have caused financial assets to become credit-impaired.
See Also
References
- ↑ IFRS Standard 9, Financial Instruments