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Under Ind AS 109, the THREE-STAGE general approach moves an asset from Stage 1 to Stage 2 when:
AThere is a SIGNIFICANT INCREASE IN CREDIT RISK (SICR) since initial recognition (whether or not actual default has occurred)
BThe fair value of collateral falls below the outstanding balance
CThe asset's market value falls more than 5% below its carrying amount
DThe borrower has actually defaulted on a contractual payment
Answer & Solution
Correct answer: A. There is a SIGNIFICANT INCREASE IN CREDIT RISK (SICR) since initial recognition (whether or not actual default has occurred)
Stage 2 is triggered by SICR since initial recognition — a forward-looking concept that does NOT require actual default. Loss allowance moves from 12-month ECL (Stage 1) to lifetime ECL (Stage 2). Stage 3 requires credit IMPAIRMENT (actual default or other detrimental events). A 30-day past-due is a rebuttable presumption of SICR.
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