In this workout, we're looking at Bank B who has granted 100 million of auto loans and we're asked to calculate the gross and net loan balances that will be appearing on the balance sheet and the interest income in the income statement, assuming that the bank reports under US gap.

So for the gross loan amount, we just take the a hundred million size of the loan portfolio.

For the net loan amount, though we need to deduct the expected credit loss provision, which under US gap is always calculated as the gross amount multiplied by the expected lifetime probability of default times the loss given default on a lifetime basis as well to give us an expected credit loss provision of two.

This is for all loans, but does match the stage two approach under IFRS.

This will give us a net loan amount of the 100 minus the 2 million expected credit loss provision.

The calculation of interest income in the income statement also matches that of the stage two approach under IFRS, where we take the interest rate of 10% and multiply it by the gross loan amount of 100 to give us 10 million.

So accounting for the current expected credit loss provision under US gap matches the stage two approach under.