Accounting for accounts receivable according to ifrs

Аннотация

Different types of receivables are present in almost every financial statement. The accounting model for different types of financial assets, in particular different types of receivables, depends on the classification category into which they will be assigned for subsequent accounting. This article discusses the procedure for accounting, recognition, and valuation of receivables according to IAS 39. The article also presents the procedure for creating a reserve for doubtful items and calculating the depreciable cost. Finally, the requirements for disclosure of information in relation to accounts receivable, which are defined in IFRS 7 “Financial Instruments: Disclosures”, are considered. Key words: Financial instruments, financial asset, liabilities, receivables, investments, payment, contract, advances, provision for doubtful debts, financial statements, amortized cost. Accounting for accounts receivable according to the International Financial Reporting Standards (IFRS) primarily involves recognition, measurement, impairment, and derecognition of receivables. The key standard for accounts receivable is IFRS 9: Financial Instruments. According to IAS 39 Financial Instruments: “Recognition and Measurement, receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are not held for trading” [3]. If a financial asset is quoted on the market, it cannot be classified as a receivable (in which case it will be classified as an investment). As mentioned above, IFRS does not have a separate standard regulating the accounting of receivables. IAS 39 relates exclusively to financial instruments. Accounting principles for accounts receivable are provided for specific cases in individual standards, including IAS 1 Presentation of Financial Statements, IAS 18 Revenue, IAS 16 Property, Plant and Equipment, IAS 11 "Construction contracts". In addition, IFRS 7 Financial Instruments: Disclosures sets out disclosure requirements, particularly in relation to accounts receivable, in financial statements. According to IFRS, general criteria for recognizing assets and liabilities are used to recognize receivables: • it is highly probable that future economic benefits associated with the asset will flow; • the value of the asset can be measured reliably. Accounts receivable should be classified according to their maturity into short-term (due within 12 months from the reporting date or the normal operating cycle) and long-term (due over a period exceeding 12 months or the normal operating cycle). IFRS 1 does not allow assets and liabilities to be offset against each other unless offset is required or permitted by other standards. It is worth noting that 220 “MILLIY IQTISODIYOTNI ISLOH QILISH VA BARQAROR RIVOJLANTIRISH ISTIQBOLLARI” mavzusida xalqaro ilmiy-amaliy konferensiyasi subtracting the reserve for impairment of receivables from the amount of accounts receivable does not constitute an offset of items of assets and liabilities. Accounts receivable are measured at initial recognition at transaction cost (fair value). IAS 39 defines fair value as the amount at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. After initial recognition, receivables must be measured at amortized cost using the effective interest method. The effective interest rate is the rate that exactly discounts expected future cash payments or receipts to maturity of the financial instrument. The effective interest method calculates and accrues interest income or interest expense during the period under consideration. Provision for doubtful accounts receivable In accordance with IFRS 39, which governs the accounting for financial assets, an impairment of receivables is recognized when events occur after initial recognition. An entity must assess at each reporting date whether there is objective evidence of impairment. If such indications exist, then the company must make all necessary calculations to determine the impairment loss. The standard sets out a number of factors that may indicate evidence of impairment: • significant financial difficulties of the debtor; • violation of the terms of the contract; • probability of bankruptcy of the debtor; • fair value of the collateral; • liquidity of the debtor; • general economic factors; • other factors. “Impairment of receivables in practice is called “Provision for impairment of receivables” (Bad debt provision). A reserve is created for each type of receivables (reserve for impairment of trade receivables, reserve for impairment of advances issued, reserve for impairment of other receivables, etc.)” [4] . The carrying amount of receivables should be reduced by the amount of the allowance for impairment of receivables by writing off to expenses. In accordance with IFRS 39, the calculation of the provision must be carried out using the amortized cost method, i.e., it