Rebound Inc.reports under IFRS.In 2016 Rebound recognized an impairment of $200,000 due to a troubled debt restructuring.In 2017 Rebound was pleased to determine that more cash flows would be received from the receivable than was previously thought,such that,if the total impairment were to be calculated in 2017,it would be estimated as $150,000 rather than $200,000.How should Rebound treat this in its 2017 income statement?

Question

Quizplus · Accepted Answer

According to IAS 39, an entity is allowed to reverse an impairment loss if there is a change in the estimate of the expected cash flows. In this case, Rebound has determined that the impairment charge recorded in 2016 was too high, and if the impairment were to be calculated in 2017, it would be lower. Therefore, Rebound should recognize an increase in net income of $50,000 in its 2017 income statement. Option A is incorrect because IAS 39 does allow for recovery of previous impairments under certain circumstances. Option B is incorrect because there is no indication that the impairment charge in 2016 was in error. Option D is incorrect because option C is the correct answer.