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Under Ind AS 109's three-stage ECL model, interest revenue in STAGE 3 (credit-impaired) is calculated on:
AZero — interest recognition is suspended once the asset is credit-impaired
BThe AMORTISED COST of the asset — that is, gross carrying amount NET of the loss allowance
CThe gross carrying amount of the asset, same as in Stage 1 and Stage 2
DThe original transaction price of the asset, regardless of impairment
Answer & Solution
Correct answer: B. The AMORTISED COST of the asset — that is, gross carrying amount NET of the loss allowance
Para 5.4.1 — Stage 1 and Stage 2 recognise interest on the GROSS carrying amount (using EIR); Stage 3 (credit-impaired) recognises interest on the AMORTISED COST = gross less the lifetime ECL allowance. This deliberately reduces interest revenue when impairment is severe. Interest is NOT suspended — accrual continues on a lower base.
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