An entity is not required to track the changes in credit risk on the financial instruments at each reporting date, but instead requires the entity to recognize a loss allowance based on lifetime expected credit losses at each reporting date. Which impairment approach is this describing?
A. Purchased or originated credit-impaired approach
B. Simplified approach
C. General approach
D. Incurred loss approach
This description corresponds to the General Approach, which requires entities to recognize a loss allowance based on lifetime expected credit losses for all financial instruments at each reporting date, not just for those that have experienced a significant increase in credit risk. Therefore, the correct answer is:
C. General approach