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Under Ind AS 101's impairment exception, if determining whether there has been a SIGNIFICANT INCREASE IN CREDIT RISK since initial recognition would require UNDUE COST OR EFFORT at the date of transition, the entity:
ASkips ECL entirely until reasonable historical data is available
BUses 12-month ECL until significant deterioration is observed
CApplies the simplified approach (lifetime ECL) regardless of asset type
DRecognises a loss allowance at LIFETIME ECL at each reporting date until the financial instrument is derecognised — unless the instrument is low credit risk at a reporting date
Answer & Solution
Correct answer: D. Recognises a loss allowance at LIFETIME ECL at each reporting date until the financial instrument is derecognised — unless the instrument is low credit risk at a reporting date
Ind AS 101 impairment exception — if determining SICR at transition is impracticable (undue cost/effort), the entity recognises LIFETIME ECL at each reporting date until derecognition, unless the instrument is LOW CREDIT RISK at any reporting date (in which case 12-month ECL applies). This effectively conservatively defaults to lifetime ECL when historical credit-risk data is unavailable at transition.
Related questions
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