Interest income is recognized on an accrual basis based on the effective interest rate.
Interest income comprises interest on financial instruments measured at amortized cost and at fair value through other comprehensive income.
The effective interest rate is the rate that discounts estimated future cash flows to the gross carrying amount of the financial asset.
Interest income is calculated on the gross carrying amount, except for credit-impaired assets and purchased or originated creditimpaired (POCI) financial assets. For such assets, interest income is calculated on the gross carrying amount less allowances for expected credit losses.
Interest income calculated using the effective interest rate also includes income and expenses from fees and commissions directly related to the creation of financial assets with specific repayment schedules. These include commissions for granting credit, for changing the terms of a loan agreement, changing the form of financing, restructuring a loan, or commissions for brokering loans and credits