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CMA Final · Corporate Financial Reporting · NBFCs - Provisioning Norms, Accounting and Reporting

An Ind AS NBFC holds a loan with a gross carrying amount of Rs 100 lakh that is credit-impaired (Stage 3). The loss allowance is Rs 40 lakh and the effective interest rate is 12% per annum. For the next year, how much interest revenue should it recognise?

Interest revenue is Rs 7.2 lakh. For a credit-impaired Stage 3 loan, the effective interest rate is applied to the amortised cost, meaning the gross carrying amount of Rs 100 lakh less the allowance of Rs 40 lakh. That gives 12% of Rs 60 lakh.

  1. ARs 7.2 lakhCorrect
  2. BRs 12 lakh
  3. CRs 4.8 lakh
  4. DRs 0

Explanation

For Stage 3 assets, Ind AS 109 requires interest revenue to be computed on the amortised cost, which is the gross carrying amount less the loss allowance. That base is Rs 100 lakh minus Rs 40 lakh, or Rs 60 lakh. At 12% the interest is Rs 7.2 lakh. Rs 12 lakh wrongly uses the gross amount.

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