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Question

As per the recently published discussion paper on expected credit loss model for banks the model proposes to compute ECL (depending on whether there has been a SICR) based on:

A 12-month credit losses Correct Answer Incorrect Answer
B Lifetime credit losses Correct Answer Incorrect Answer
C Incurred credit Losses Correct Answer Incorrect Answer
D Either a. or b. Correct Answer Incorrect Answer
E Any of the above Correct Answer Incorrect Answer

Solution

Practical expedient for financial assets with low credit risk In line with Ind AS 109, the discussion paper proposes to compute ECL either as 12-month credit losses or lifetime credit losses, depending on whether there has been a SICR. However, under the proposed framework, loss allowances on lease receivables and contractual guarantees would always be measured at lifetime ECL.

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