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Reviewed by CA Divyanshu Sengar · Last reviewed 11 October 2026
Apply base, downside and upside loss rates, with scenario weights that add to 100%, to each receivables segment and get the lifetime expected credit loss, coverage percentage and net exposure.
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The simplified Ind AS 109 approach can use lifetime expected credit losses for qualifying trade receivables. A provision matrix frequently groups debt by days overdue or customer type, applies historical loss evidence and adjusts it for reasonable and supportable forward-looking information. A percentage selected without documented evidence is an illustration only.
A ₹10 lakh current receivable bucket with loss rates of 0.5% in the base case, 2% in the downside case and 0.2% in the upside case, weighted 60%, 30% and 10%, gives a weighted loss rate of 0.92% and ECL of ₹9,200. Applying the same procedure to an overdue ₹2.5 lakh bucket and a ₹1 lakh older bucket yields the portfolio-level loss estimate.
Historical recovery trends, customer concentrations, geographic exposure, insurance, security, disputes, credit notes, macroeconomic outlook and write-off policies can alter the appropriate rate. Segmenting a broad portfolio into economically different groups is often more important than fine-tuning a single percentage. The engine prevents scenario weights that do not add to 100%.
Compare calculated lifetime ECL with the carrying receivable and the existing allowance. The journal commonly recognises a credit-loss expense and an allowance adjustment for the movement, subject to reversals and prior balances. The output does not compute a loan-specific stage 1/2/3 model, tax deduction for bad debt, or regulatory provisioning.
The ageing planner uses a single loss rate per bucket. This tool applies the Ind AS 109 expected-loss idea with three weighted scenarios per segment.
From historical credit-loss experience by segment, adjusted for current conditions and forecasts. Document the basis, because the rates drive the whole provision.
No. ECL under financial reporting and tax deductibility of bad debts are different questions.
Rates and rules were checked against these sources on 11 October 2026. Notifications and standards change; confirm on the official site before you file, book or advise.
Educational working tool. Results follow the scope and assumptions above and the figures you enter; they are not tax, audit, legal or accounting advice. Tax and accounting treatment depends on facts and on the law or standard in force for the relevant period, so verify the official source or consult a professional before you rely on a result.
Background, worked examples and the rules behind these numbers.