Loans purchased of receivables From 1 January 2020, The Company and its subsidiaries recognised interest on loans purchased of non-performing receivables based on the cost net of allowance for expected credit loss, using an effective interest rate adjusted to reflect the credit risk, and recognised on an accrual basis. (Before 1 January 2020, the Company and its subsidiaries recognised interest income based on the effective yield rate of the portfolio multiplied by the new book value (acquisition cost) of the outstanding balances of receivables for those receivables with loan repayment was received during the year and recognised interest income by using the effective interest method for those receivables to the extent that this is not greater than the amount received from such receivables and in case the amount received is greater than purchased cost and interest income, the Company recognised the difference amount to be gain on debt settlement in profit or loss). The credit risk-adjusted effective interest rate is calculated by discounting the estimated future cash flows to be paid or received over the expected life of the financial asset to derive the amortised cost of purchase or originated credit-impaired financial assets. In estimating the net expected cash inflows, reference is made to historical data on net cash inflows from related actual expenses in the past to develop a model, based on the assumption that the net expected cash inflows and the expected life of financial instruments with similar characteristics can be estimated reliably. In cases where the cost of an acquired NPL receivable has been fully amortised, the Company and its subsidiaries still has the right to demand the debtor make payment under the contract. When such payments are received from a debtor, the Company and its subsidiaries recognise such amount as gain on debt settlement. Other Loans From 1 January 2020, The Company and its subsidiary recognised interest income from loan on an accrual basis, using the effective interest rate method, over the term of the contract with the calculation based on the gross carrying amounts of receivables. The effective interest rate is the discount rate that estimates future cash flows over the expected life of the financial instrument by considering the discounted or excess of the asset acquisition and fees including costs that are part of the effective interest rate. For loan subsequently become credit-impaired, the Company and its subsidiary recognised interest income by using the effective interest rate method, based on the net carrying amount of the receivables (gross book value net of allowance for expected credit loss). If the financial assets are not credit-impaired, the subsidiary recognises interest income with the calculation based on initial book value. Before 1 January 2020, the Company and its subsidiaries cease accrual of interest income for loans on which principal or interest payments have been defaulted for more than three months past the due date and reversed accrued interest which already recorded and recognised as interest income from the accounts. Interest is then recognised as income on a cash basis until the debtors are able to make payment. In addition, the Company and its subsidiaries recognise interest income on restructured loans on an accrual basis, with reference to the interest rate stipulated in the agreements, with the exception of interest on loans that are subject to monitoring for compliance with restructuring conditions, which the Company and its subsidiaries recognise as income on a cash basis until the receivable is able to comply with the restructuring conditions for a period of no less than three months or three installments, whichever is longer. 56-1 One Report / Annual Report 2021 Thanachart Capital Publ ic Company Limited 51
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