Question

BankCo holds debt securities: • Portfolio A:

Q: Answer-BankCo holds debt securities: • Portfolio A: Government bonds held to collect contractual interest/p...

For FVTOCI debt, ECL allowance goes to PL. However, carrying amount isnt reduced instead, the loss allowance is booked in PL and offset in OCI fair value reserve adjusted.

Government bonds held to collect contractual interest/principal. • Portfolio B: Corporate bonds held to collect and occasionally sell to manage liquidity. • Portfolio C: Equity investments in FinTech start-up for strategic relationship. BankCo recognises ECL allowance on FVTOCI bonds. How is this presented?

A Reduce carrying value in balance sheet.

B Recognise loss allowance in OCI, no P&L impact.

C Recognise loss allowance in P&L but carrying amount not reduced; cumulative OCI reserve adjusted.

D Adjust cost of bonds directly.

E Recognise deferred tax only.

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BankCo holds debt securities: • Portfolio A:

Solution