Impairment loss allowance on performing assets
Should impairment loss allowance be provided on performing assets or standard assets at the time of recognition of such assets?
The expected credit loss is required to be applied on day one for all types of financing assets. The expected credit losses are the present value of all cash short falls over the expected life of the financial instrument. The credit loss is the difference between all contractual cash flows that are due to an entity as per the contract and all the cash flows that the entity expects to receive, discounted at the original effective interest rate. As per the new impairment model, impairment losses should be recognised even for financial assets that are newly originated or acquired.
Key takeaways from the RBI notification dated 12th Nov 2021
How is the expected credit loss measured
Treatment of collateral value for expected credit losses
What are the three stages of impairment loss
Simplified Approach for ECL for trade receivables
Recognition of interest revenue during all three stages
What is meant by significant increase in credit risk
Impact of impairment requirements on first-time adoption
Approaches for assessing credit risk
What is the new Expected Credit Loss Model
Presentation of impairment loss for debt instruments at FVOCI
