Financial instruments

Question 1

in case when FA becomes credit impaired in initial recognition how the interest income is calculated?

Answer 1

when calculating the effective interest income on this asset, this rate
is applied to the amortised cost of the asset (not to the gross carrying amount):
Interest income = Amortised cost x EIR.

Question 2

in case where FA was already credit impaired on initial recognition how interest income is calculated

Answer 2

calculate the credit adjusted effective interest rate and it is applied to amortized cost

Question 3

how FA that was already credit impaired on initial recognition measured if it credit risk subsequently improves?

Answer 3

If the asset was credit-impaired on initial recognition, the asset and its interest income will always be
measured using a credit-adjusted effective interest rate applied to the amortised cost, even if the credit
risk subsequently improves.