Question
Kingsley Wholesale applies the IFRS 9 simplified approach to its trade receivables: the loss allowance always equals lifetime expected credit losses, measured with a provision matrix based on its history of defaults, adjusted for current conditions and forecasts. At December 31, 2026:
| Days past due | Gross receivables | Expected loss rate |
|---|
| Current | $150,000 | 1% |
| 1–30 days | $60,000 | 4% |
| 31–90 days | $40,000 | 12% |
| Over 90 days | $10,000 | 40% |
The loss allowance was $9,000 (credit) at January 1, 2026. During the year Kingsley wrote off $3,500 of receivables against it. There were no recoveries.
Required:
- Required Loss Allowance — the loss allowance at December 31, 2026.
- Impairment Loss — the impairment loss Kingsley recognises in profit or loss for 2026.
- Journal Entry — the December 31, 2026 entry. Use Impairment Loss and Allowance for Doubtful Accounts (the IFRS 9 loss allowance).
Statements in this challenge
- Required Loss AllowanceNumeric Answer
- Impairment LossNumeric Answer
- Journal EntryJournal Entry
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IFRS 9 — expected credit losses
The allowance is an estimate of receivables that will not be collected, recognised before any specific account is known to have failed. Keep the two mechanics apart: setting or adjusting the allowance affects profit, whereas writing a specific account off against an existing allowance does not.
Common mistakes
- Recording the full estimate as the expense when the allowance already carries a balance — under the balance-sheet approach the entry is the movement needed, not the target.
- Taking a write-off of a specific debt to expense a second time when an allowance already exists.
- Reducing the receivable directly and leaving no allowance account, which loses the gross amount.
Further readingIFRS 9: expected credit losses