Recognition of interest revenue during all three stages

Recognition of interest revenue during all three stages

How is interest revenue recognised for a financial asset during all the three stages?

Interest revenue is always recognised based on the effective interest rate. The effective interest rate is applied on the opening carrying value of a financial asset. Impairment loss, if any, at this stage will not be reduced from the carrying value while computing the interest revenue in the second stage when the credit risk increases significantly. Interest revenue again is recognised on the opening carrying value of the financial asset before adjusting the impairment loss allowance. However, when the financial asset becomes credit impaired, interest revenue would be recognised in the amortised cost which is the carrying value as reduced by the impairment loss allowance.

Ind AS Accounting Standards

Ind AS Accounting Standards

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

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

Impairment loss allowance on performing assets

Impairment for debt instruments classified as FVOCI

New impairment methodology