Which of the following events provide objective evidence that a financial asset has been impaired:
I A default in interest payments.
II The borrower enters into bankruptcy.
III Significant financial difficulty of the issuer.
IV The downgrade of an entity's credit rating.
A) I, II and III only;
B) II, III and IV only;
C) I, III and IV only;
D) II and IV only.

Question

Which of the following events provide objective evidence that a financial asset has been impaired: 
I A default in interest payments.
II The borrower enters into bankruptcy.
III Significant financial difficulty of the issuer.
IV The downgrade of an entity's credit rating.
A) I, II and III only;
B) II, III and IV only;
C) I, III and IV only;
D) II and IV only.

Quizplus · Accepted Answer

Events such as a default in interest payments, the borrower entering into bankruptcy, and significant financial difficulty of the issuer are objective indicators that a financial asset has been impaired. These situations directly impact the borrower's ability to meet obligations, signaling potential losses on the asset. A downgrade of an entity's credit rating, while concerning, is more subjective and not a direct indicator of impairment.

Which of the Following Events Provide Objective Evidence That a Financial