Ecl

Fire plc is a US-based company that produces engineering equipment for the mining industry and has a year ending 30 September 20X2.
On 1 October 20X1 Fire acquired an investment in $3,000,000 8% loan stock at par. The investment meets the business model and contractual cash flows test and is therefore measured at amortised cost. The loan stock has an effective annual rate of interest of 10%. No cash repayments of interest were received in the year ended 30 September 20X2.
Fire made the following estimates:
(1) At 1 October 20X1 there was a 5% probability that the borrower would default on the loan during the year resulting in a 100% loss.
(2) At 30 September 20X2 there is a 2% probability that the borrower will default on the loan before 30 September 20X3 resulting in a 100% loss.

Solution :
Solution:
Investment in loan stock
IFRS 9, Financial Instruments adopts an ‘expected loss’ model for impairment; in other words, credit losses are recognised when expected rather than when incurred.
On initial recognition (1 October 20X1), Fire has correctly recognised 12-month expected credit losses of 5% x $3,000,000 = $150,000, reflecting the 5% probability that the borrower would default on the loan with a 100% loss.
An impairment loss on a financial asset at amortised cost was correctly recognised in profit or loss, with a corresponding entry to an allowance account, which is offset against the carrying amount of the financial asset in the statement of financial position.

1 October 20X1
DEBIT Profit or loss $150,000
CREDIT Impairment allowance $150,000
This will need to be adjusted for information available at the year end.

Finance income for the year needs to be recorded:
30 September 20X2
DEBIT Financial asset (10% x $3m) $300,000
CREDIT Profit or loss $300,000
The gross carrying amount of the financial asset (before the allowance for credit losses) based on ACM is therefore $3,300,000.

At 30 September 20X2, expected credit losses are re-assessed in accordance with IFRS 9, using the 2% probability that the borrower will default on the loan. The impairment allowance needed would be 2% x gross amount of $3,000,000 = $60,000.
There is also a finance cost, being the unwinding of the discount on the allowance at initial recognition, which is 8% x $150,000 = $12,000.

I dont get it why unwinding of dicount on the allowance, we use 8% instead of 10 because the question is silent.