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Under Ind AS 109, the SIMPLIFIED APPROACH to ECL is MANDATORY for:
ATrade receivables or contract assets within Ind AS 115's scope that DO NOT have a significant financing component
BAll financial assets held by small companies as defined under the Companies Act
CAny financial asset measured at amortised cost
DLoans to related parties with maturity less than one year
Answer & Solution
Correct answer: A. Trade receivables or contract assets within Ind AS 115's scope that DO NOT have a significant financing component
Para 5.5.15 — the simplified approach is MANDATORY for trade receivables and contract assets without a significant financing component (always measured at lifetime ECL, no stage tracking needed). For trade receivables WITH a significant financing component and for lease receivables, the simplified approach is OPTIONAL (policy choice). All other financial assets follow the general (three-stage) approach.
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