Credit losses - Simplification

Hi, What do you mean exactly? I don't quite follow your point, sorry. Thanks

Hi, If there is a financing component then the market rates if interest can change and so the value of the receivable/contract asset may change as the rates change so therefore we adopt the normal model to see how it changes each year. If there is no financing component then the interest rate doesn't have an impact of the value of the receivable and so the simplified option exists. As a practical example, think about a company's trade receivable and having to look at each stage for each of the receivables. It just wouldn't be practical and so the method is simplified. Thanks