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    Question

    BankCo holds debt securities: • Portfolio A:

    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. Correct Answer Incorrect Answer
    B Recognise loss allowance in OCI, no P&L impact. Correct Answer Incorrect Answer
    C Recognise loss allowance in P&L but carrying amount not reduced; cumulative OCI reserve adjusted. Correct Answer Incorrect Answer
    D Adjust cost of bonds directly. Correct Answer Incorrect Answer
    E Recognise deferred tax only. Correct Answer Incorrect Answer

    Solution

    For FVTOCI debt, ECL allowance goes to P&L. However, carrying amount isn’t reduced; instead, the loss allowance is booked in P&L and offset in OCI (fair value reserve adjusted).

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