CERTYNEX IFRS ACADEMY

Tilia SA holds a loan measured at amortised cost that became credit-impaired after origination (it was not credit-impaired at origination). Which statements are correct? Several answers are possible.

The expected credit loss is measured by discounting the estimated future cash flows at the market rate at the reporting date.

The expected credit loss is the difference between the gross carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.

Once the loan is credit-impaired, interest revenue remains calculated on amortised cost until derecognition, whatever happens to credit risk.

If credit risk improves so that the loan is no longer credit-impaired, and the improvement can be related objectively to a later event, the effective rate is again applied to the gross carrying amount in subsequent periods.

The adjustment of the loss allowance is recognised in profit or loss as an impairment gain or loss.