Aug 14 2020, 12:11 PM
QUOTE(Marcus5003 @ Aug 14 2020, 11:21 AM)
understand, thanks for your clarification...in small firm and n no chance looking at bank's account in depth.
another last question
As I know income is recognised in accrual basis, hence, during the moratorium period, bank still capture those unpaid interest as the operating income rite?
Which mean that operating income will be not affected during the moratorium period, but, additional expenses such as ECL will take place and reduce the net profit.
Not sure my interpretation correct or not, hope can learn from people who know how bank’s account actually work.
Interest revenue will still be recognised but may be lower.another last question
As I know income is recognised in accrual basis, hence, during the moratorium period, bank still capture those unpaid interest as the operating income rite? Which mean that operating income will be not affected during the moratorium period, but, additional expenses such as ECL will take place and reduce the net profit.
Not sure my interpretation correct or not, hope can learn from people who know how bank’s account actually work.
A debt has carrying amount of RM1,000,000 at 1 Jan 2019.
Loss allowance is RM40,000. EIR=5.0%
At 31 Dec 2020, you reassess changes in credit risk.
Stage 1 scenario
There is no significant increase in credit risk since initial recognition.
But 12-month ECL = RM44,000 at 31 Dec 2019.
I.e. needs to be an increase in allowance of RM4,000.
For 31 Dec 2019
| Loss allowance (SOFP) | RM44,000 |
| Impairment expense (SOPL) | RM4,000 |
| Interest revenue (SOPL) | RM50,000 (RM1,000,000 x 5.0%) |
Profit=RM50,000-RM4,000=RM46,000
Stage 2 scenario
12-month ECL = RM44,000 at 31 Dec 2019
Lifetime ECL = RM60,000
Due to significant increase in credit risk, loss allowance must = lifetime ECL
I.e. an increase of RM20,000 (RM60,000-RM40,000)
| Loss allowance (SOFP) | RM60,000 |
| Impairment expense (SOPL) | RM20,000 |
| Interest revenue (SOPL) | RM50,000 (RM1,000,000 x 5.0%) |
Profit=RM50,000-RM20,000=RM30,000
Stage 3 scenario
Got clear evidence of impairment.
12-month ECL = RM44,000 at 31 Dec 2019
Lifetime ECL = RM60,000
| Loss allowance (SOFP) | RM60,000 |
| Impairment expense (SOPL) | RM20,000 |
| Interest revenue (SOPL) | RM47,000 [(RM1,000,000-RM60,000) x 5.0%)] |
Profit=RM47,000-RM20,000=RM27,000
Profits compared
| Stage 1 | Stage 2 | Stage 3 |
| RM46,000 | RM30,000 | RM27,000 |
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