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Significant loans > = IDR 15 bio Not-significant loans < IDR 15 bio
Individual loan assessment (specific allowance) Present value of future cash flows Calculate unwinding for each single loan Stop regular interest accrual
Assessment for impairment on a portfolio basis considering the loss identification period (LIP) (portfolio allowance for non-impaired loans) Exposure x PD x LGD x LIP No unwinding, as long as it is not material Continue to accrue interest on a regular basis (contractually agreed interest)
Collective loan assessment (portfolio allowance for insignificant loans) EXP x PD x LGD Calculate unwinding on a portfolio basis Stop regular interest accrual
Slide 1
When a loan is classified as impaired, interest ceases to be recognised on a regular accruals basis Interest which previously had been accrue have to reverse back Recognize new interest income by using effective interest rate based on present value of loans carrying value after consider any impairment (unwinding income)
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Slide 3
* original effective interest rate of 10% times the recoverable amount of 624 ** being cash of 100 less interest income of 62
Slide 5
* being original effective interest rate of 10% times the carrying amount of 586 = 624-38
End of year 4 Dr. Cash Cr. Interest income Cr. Loans Dr. Cash Cr. Loans Dr. Provision Cr. Loans
**being original effective interest rate of 10% times the carrying amount of 546 = 587-41
Slide 6