Expected Credit Loss provisioning using the simplified approach for trade receivables — provision matrix by aging bucket with a forward-looking adjustment. Fast first pass before the full three-stage model for financial assets.
| Ageing bucket | Balance (₹) | Historical loss rate (%) | Base ECL | After fwd-looking adj. |
|---|---|---|---|---|
| Current (0-30 days) | ₹25,000 | ₹27,500 | ||
| 31-60 days | ₹30,000 | ₹33,000 | ||
| 61-90 days | ₹40,000 | ₹44,000 | ||
| 91-180 days | ₹90,000 | ₹99,000 | ||
| 181-365 days | ₹1,60,000 | ₹1,76,000 | ||
| Above 365 days | ₹1,87,500 | ₹2,06,250 | ||
| Total | ₹85,50,000 | — | ₹5,32,500 | ₹5,85,750 |
Ind AS 109 has two ECL approaches: the general three-stage approach (Stage 1 = 12-month ECL, Stage 2 = lifetime ECL post-significant-increase-in-credit-risk, Stage 3 = lifetime ECL post-credit- impaired) used by banks and NBFCs; and the simplified approach (lifetime ECL via provision matrix) available for trade receivables, contract assets and lease receivables — most corporates use this.
This calculator does the simplified approach. For NBFC / bank general-approach work, you’ll need a stage-classification model (PD, LGD, EAD) that’s out of scope for a quick web tool — but the forward-looking adjustment principle here applies the same way.
Ind AS 109 — "Financial Instruments" — introduced the Expected Credit Loss (ECL) model for impairment of financial assets, replacing the incurred-loss model of Ind AS 39. The ECL model is forward-looking: at every reporting date, an entity recognises a loss allowance equal to either 12-month ECL or lifetime ECL depending on whether credit risk has significantly increased since initial recognition.
The three-stage general model: Stage 1 (performing) — 12-month ECL, interest revenue on gross carrying amount. Stage 2 (significant increase in credit risk but not credit-impaired) — lifetime ECL, interest on gross. Stage 3 (credit-impaired) — lifetime ECL, interest on net carrying amount (gross minus loss allowance). Movement between stages is based on changes in credit risk, not just past-due status.
For trade receivables, contract assets, and lease receivables — Ind AS 109 provides a simplified approach: lifetime ECL from initial recognition, no stage assessment required. A "provision matrix" (ageing-bucket-based loss rates calibrated to historical data and adjusted for forward-looking information) is the most commonly used technique. RBI's IRACP norms for banks and NBFCs are NOT a substitute for Ind AS 109 ECL — they are minimum regulatory requirements.
A company has trade receivables of ₹50 cr. Ageing analysis shows the following buckets and historical loss rates (adjusted for forward-looking information).
