Impairments - Level II FRA (Financial Assets)

A financial asset (debt or equity) is impaired when:
Carrying Amount of the asset is permanently > Recoverable Amount

Under IFRS:
· At each reporting period, Held-to-maturity and Available-for-Sale financial assets are assessed for impairment.
· Held-for-Trading securities and investments classified at fair value through profit or loss are not assessed for impairment because they are reported at fair value and any impairment loss is already recognized in Income Statement immediately.


Reversal of Impairment Loss:
· Impairment losses on Available for Sale Equity Securities cannot be reversed.
· Impairment losses on Available for Sale Debt Securities can be reversed.
· When impairment loss is reversed, the amount of reversal is recognized in Income Statement.



Under U.S. GAAP:
Available for sale and held-to-maturity securities are considered impaired only when the decline in their value is other than temporary.

· When a decline in value is other than temporary, the carrying value of security is written down to its fair value and it becomes a new cost basis.
· The amount of the write-down is treated as Realized loss and reported on the Income Statement.


Reversal of Impairment Loss:
· Impairment losses on Available for Sale Equity and/or Debt Securities cannot be reversed.
· Subsequent increases in fair value (and decreases if other than temporary) can be treated as unrealized gains or losses and included in Other Comprehensive Income.