Skip to content

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

Mahalaxmi Credit Ltd, an NBFC following Ind AS, computes expected credit loss under Ind AS 109 of Rs 3.0 crore on its loan book. The provision computed under the RBI's IRACP norms for the same book is Rs 4.2 crore. What amount must be appropriated to an impairment reserve from profit?

Rs 1.2 crore must go to the impairment reserve. For an Ind AS NBFC, the ECL provision is charged to profit and loss, and any excess of the IRACP provision over it, Rs 4.2 crore less Rs 3.0 crore, is appropriated to a reserve that is not available for dividend.

  1. ARs 1.2 croreCorrect
  2. BRs 3.0 crore
  3. CRs 4.2 crore
  4. DNil

Explanation

Where the IRACP provision exceeds the Ind AS 109 ECL, the shortfall is transferred from profit to an impairment reserve. 4.2 - 3.0 = Rs 1.2 crore. The ECL of Rs 3.0 crore is charged to the statement of profit and loss as the actual provision.

Did you get it right without looking?

One question tells you little. A timed set on NBFCs - Provisioning Norms, Accounting and Reporting shows your real accuracy, how long you take and where you lose marks.

Practise NBFCs - Provisioning Norms, Accounting and ReportingFree diagnostic mock

More NBFCs - Provisioning Norms, Accounting and Reporting questions