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      Question

      Under the proposed framework on ECL model for bank,

      interest income will be recognised on what basis for stage 3 assets?
      A Actual receipt basis Correct Answer Incorrect Answer
      B Accrual basis Correct Answer Incorrect Answer
      C Time proportion basis Correct Answer Incorrect Answer
      D Straight line basis Correct Answer Incorrect Answer
      E None of the above Correct Answer Incorrect Answer

      Solution

      Interest recognition in respect of Stage 3 assets should be on the basis of actual receipt of cash flows and not on an accrual basis. This approach is consistent with the approach in US GAAP which permits banks to place financial assets on nonaccrual basis if the cash flows cannot be reliably estimated.

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