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Under Ind AS 109, the MAXIMUM PERIOD over which the entity measures expected credit losses is:
A12 months only — beyond which losses are deemed too uncertain
B5 years for retail receivables; 10 years for corporate; otherwise contractual maturity
CThe full expected economic life of the lending relationship, including likely renewals
DThe maximum CONTRACTUAL period (including extension options that the entity is exposed to credit risk on) — not a longer period, even if business practice typically rolls forward
Answer & Solution
Correct answer: D. The maximum CONTRACTUAL period (including extension options that the entity is exposed to credit risk on) — not a longer period, even if business practice typically rolls forward
Para 5.5.19 — ECL is measured over the maximum CONTRACTUAL period (including renewals/extensions on which the entity is exposed). Business practice of renewing relationships beyond the contractual period does NOT extend the measurement window. (Exception: revolving credit facilities like credit cards — para 5.5.20 considers expected behavioural life.)
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