The effect of direct origination cost is a decrease in the effective interest rate of a loan receivable.

When there is a significant increase in the credit risk on a financial asset since its initial recognition, interest revenue is computed on the net carrying amount of the financial asset (i.e., gross carrying amount less loss allowance).

Impairment loss on financial assets may be recorded as a direct deduction to the impaired asset’s account or through an allowance. If the entity uses an allowance account to record impairment loss the amount credited to the allowance account is equal to the impairment loss recognized if the carrying amount of the impaired financial asset immediately before impairment testing does not include any accrued interest already recognized

Impairment loss on financial assets may be recorded as a direct deduction to the impaired asset’s account or through an allowance. If the entity uses an allowance account to record impairment loss, in no case would the amount credited to the allowance account be equal to the impairment loss recognized.

An entity determines that the credit risk on a loan receivable has not increased significantly since initial recognition. The entity should recognize loss allowance equal to

According to PFRS 9, it refers to the expected credit losses that result from all possible default events over the expected life of a financial instrument

Interest income is computed on the net carrying amount (i.e., gross carrying amount less loss allowance) of an instrument that is under which stage of the ‘three-stages’ approach of PFRS 9’s expected credit loss model?

On January 1, 2021, ABC Bank extended a 12%, ₱1,000,000 loan to XYZ, Inc. Principal is due on January 1, 2025 but interests are due annually every January 1. ABC Bank incurred direct loan origination costs of ₱88,394 and indirect loan origination costs of ₱18,000. In addition, ABC Bank charged XYZ a 2.5-point nonrefundable loan origination fee. The effective rate is 10%. How much is the interest income in 2022?

On January 1, 2021, ABC Bank extended a 12%, ₱1,000,000 loan to XYZ, Inc. Principal is due on January 1, 2025 but interests are due annually every January 1. ABC Bank incurred direct loan origination costs of ₱88,394 and indirect loan origination costs of ₱18,000. In addition, ABC Bank charged XYZ a 2.5-point nonrefundable loan origination fee. The effective rate is 10%. How much is the interest income in 2021?

On January 1, 2021, ABC Bank extended a ₱900,000 loan to XYZ, Inc. Principal is due on December 31, 2025 but 12% interest is due annually every December 31. On December 31, 2023, XYZ, Inc. was delinquent and it was ascertained that the loan is impaired. ABC Bank assessed that interests accruing on the loan will not be collected; however, the principal is expected to be received in three equal annual installments starting on December 31, 2024. Accrued interest receivable on December 31, 2023 amounted to ₱100,000. The current market rate on December 31, 2023 is 14%. PV of ordinary annuity at 12% for 3 periods is 2.4018. How much is the balance of allowance for impairment loss on December 31, 2023 immediately after impairment testing?

On January 1, 2021, ABC Bank extended a ₱900,000 loan to XYZ, Inc. Principal is due on December 31, 2025 but 12% interest is due annually every December 31. On December 31, 2023, XYZ, Inc. was delinquent and it was ascertained that the loan is impaired. ABC Bank assessed that interests accruing on the loan will not be collected; however, the principal is expected to be received in three equal annual installments starting on December 31, 2024. Accrued interest receivable on December 31, 2023 amounted to ₱100,000. The current market rate on December 31, 2023 is 14%. PV of ordinary annuity at 12% for 3 periods is 2.4018. How much is the interest income in 2025?

On January 1, 2021, ABC Bank extended a ₱900,000 loan to XYZ, Inc. Principal is due on December 31, 2025 but 12% interest is due annually every December 31. On December 31, 2023, XYZ, Inc. was delinquent and it was ascertained that the loan is impaired. ABC Bank assessed that interests accruing on the loan will not be collected; however, the principal is expected to be received in three equal annual installments starting on December 31, 2024. Accrued interest receivable on December 31, 2023 amounted to ₱100,000. The current market rate on December 31, 2023 is 14%. PV of ordinary annuity at 12% for 3 periods is 2.4018. How much is the interest income in 2024?

On December 1, 2021, Nicole Company gave Dawn Company a P2,000,000, 12% loan. Nicole Company paid proceeds of P1,940,000 after the deduction of a P60,000 nonrefundable loan origination fee. Principal and interest are due in sixty monthly installments of P44,500, beginning January 1, 2022. The repayments yield an effective interest rate of 12% at a present value of P2,000,000 and 13.4% at a present value of P1,940,000. What amount of interest income should be reported in 2021?

On January 1, 2021, Global Bank loaned P3,000,000 to a borrower. The contract specified that the loan had a 6-year term and a 9% interest rate. Interest is payable annually every December 31 and the principal amount will be collected on December 31, 2026. Interest is collected for 2021. On December 31, 2021, the bank determined that the loan has a 12-month probability of default of 10% and expected to collect only 90% of the loan. Based on relevant information, the bank concluded that there is a 30% probability of default over the remaining term of the loan, and it is expected that only 60% of the loan will be collected. Interest is collected for 2022. On December 31, 2023, the borrower was under financial difficulty and the loan was considered impaired because there is now objective evidence of impairment. The bank agreed that only 40% of the principal will be collected on due date. Interest is collected for 2023. The present t value of 1 at 9% is 0.65 for 5 periods, 0.71 for four periods and 0.77 for three periods. The entity decided to apply the three-stage approach of determining the impairment of loan. What amount should be recorded as impairment loss for 2021?

Origination fees are fees charged by the bank against the borrower for the creation of the loan.

On January 1, 2021, Global Bank loaned P3,000,000 to a borrower. The contract specified that the loan had a 6-year term and a 9% interest rate. Interest is payable annually every December 31 and the principal amount will be collected on December 31, 2026. Interest is collected for 2021. On December 31, 2021, the bank determined that the loan has a 12-month probability of default of 10% and expected to collect only 90% of the loan. Based on relevant information, the bank concluded that there is a 30% probability of default over the remaining term of the loan, and it is expected that only 60% of the loan will be collected. Interest is collected for 2022. On December 31, 2023, the borrower was under financial difficulty and the loan was considered impaired because there is now objective evidence of impairment. The bank agreed that only 40% of the principal will be collected on due date. Interest is collected for 2023. The present t value of 1 at 9% is 0.65 for 5 periods, 0.71 for four periods and 0.77 for three periods. The entity decided to apply the three-stage approach of determining the impairment of loan. What amount should be recognized as interest income for 2022?