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Under Ind AS 109, ECL is measured in a way that reflects:
AHistorical loss experience adjusted only for inflation
BA best-estimate single point of expected loss without probability weighting
CAn unbiased, probability-weighted amount + the time value of money + reasonable/supportable information about past, current and forecast future conditions
DThe maximum possible loss the entity could ever incur on the asset
Answer & Solution
Correct answer: C. An unbiased, probability-weighted amount + the time value of money + reasonable/supportable information about past, current and forecast future conditions
Para 5.5.17 — ECL is a probability-weighted estimate. The entity must consider a RANGE of possible outcomes (need not enumerate every scenario but must reflect both default and no-default probabilities), apply time value of money (discount using the original EIR), and use reasonable/supportable information including forward-looking forecasts. Best-estimate point estimate and "maximum loss" are inconsistent with this framework.
Related questions
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