Definition
Stage 2 Assets, in the context of IFRS 9 are financial instruments that have deteriorated significantly in credit quality since initial recognition but offer no objective evidence of a credit loss event. The term Stage 2 is not formally defined in the standard[1] but has become part of the common description of the IFRS 9 methodology.
The standard formally defines the conditions that constitute a Significant Increase in Credit Risk, which necessitated the migration of an asset from stage 1 to stage 2 (and vice versa in case of a decrease). As a practical expedient, entities may assume that credit risk has not increased significantly if the credit risk of the instrument is determined to be low at the reporting date
Accounting Implications
Under IFRS 9, Stage 2 Assets
- Must recognise Lifetime Expected Credit losses
- Interest revenue is accrued at the Gross Carrying Amount
See Also
References
- ↑ IFRS Standard 9, Financial Instruments