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Bank A has receivable from Bank B in the amount of 3,5 mln from normal trading operations.

Bank A has made decision to purchase Bank B credit portfolio for the 4 mln but Bank B transferred credit portfolio in the amount of 5 mln. Bank A considers that Bank B is a problematic bank and will not receive its amount due from Bank B and want to resolve this issue in a different way.

Bank A has made the following entry in its accounts.

Dr. Loan receivable – 5mln
Cr. Receivable form bank B 3.5
Cr. Cash  0.5 mln
Cr Loan receivable ( contra account) -1 mln

Subsequently Bank A made this double entry to recognize income gained from purchased loan portfolio based on effective interest rate method.

D-r Loan receivable ( contra account)
C-r Interest income

My question is that is this approach right or not. If not what your opinion or comment will be on the above stated issue.

Thank you in advance.
in General IFRS Discussion by

1 Answer

0 votes
I would certainly not go with this answer because the amount receivable from bank B is 3.5 mln and how can we book receivables as 5 mln. Keeping in view the IAS 39 and IFRS 9; the accounting treatment for this will be as follows;

Credit Portfolio from Bank B (Dr) 5 mln
Loan Receivable from bank B (Cr) 3.5 mln
Cash Amount Paid (Cr) 1.5 mln

With reference to this transaction; a very simple understanding reflects here is that bank A has received account receivables from bank B of amount 3.5 mln in the name of credit portfolio while additional 1.5 mln amount have been paid by bank A
by Level 2 Member (4.9k points)