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    Question

    What action should lenders take when a stressed loan is

    transferred to an ARC at a price below the Net Book Value (NBV)?
    A Debit the shortfall to the profit and loss account Correct Answer Incorrect Answer
    B Reverse the excess provision on transfer to the profit and loss account Correct Answer Incorrect Answer
    C Credit the difference to the capital reserve account Correct Answer Incorrect Answer
    D Create a separate provision for the shortfall Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    According to the provided paragraph, when a stressed loan is transferred to an ARC at a price below the Net Book Value (NBV), lenders should debit the shortfall to the profit and loss account for the year in which the transfer takes place.

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