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Sir can u please explain the treatment of the Purchased or originated credit-impaired financial asset and how to calculate the credit-adjusted effective interest rate to calculate the interest income please please…??
Thanks in advance
I’m afraid this does not sound like an SBR exam question. Have you a past exam question in mind?
No sir actually i found it from kaplan study text and i still can’t understand how to find credit-adjusted effective interest rate is it talking about wacc which we were found in f9 through beta factor?
If a company buys up debts that are more likely to be bad, it should always use lifetime not 12 month credit losses.
Any credit impaired (or other) interest rate would be given in the question.
Don’t worry about the interest income too much – all that matters is that you explain that the difference between this year’s loss allowance and last year’s loss allowance goes in the P&L.