Overview

IFRS 9 mandates the use of an Effective Interest Rate (EIR) to discount to take into account the Time value of money. The guidelines also mandate the use of the Origination date EIR for Fixed-rate accounts and the Current date EIR for Variable rate accounts.

Additionally, the guidelines require the banks to use Credit Adjusted Effective Interest Rate (CAEIR) if any Purchase or Originated Credit Impaired (POCI) accounts. As mentioned, for fixed-rate POCI accounts, the Origination date Credit Adjusted EIR is used, and for variable rate accounts, the Current date Credit Adjusted EIR is used.