• Register
Search Questions / Answers

Welcome to AccountantAnswer Forum, where you can ask questions and receive answers. Although you need not be a member to ask questions or provide answers, we invite you to register an account and be a member of our community for mutual help. You can register with your email or with facebook login few seconds

Get AccountantAnswer App

Long term borrowings under IFRS


We are preparing our first IFRS accounts. We have a long term long of $ 1.75 Million at 5% annual interest rate. Currently we have recorded this loan at cost. Just wonder how we should treat this under IFRS. Can anyone explain with double entries?

asked Nov 28, 2012 in IAS 39 - Financial Instruments: Recognition and Measurement by Magx Level 1 Member (1,100 points)
recategorized Jan 13, 2013 by Mysio

1 Answer

+1 vote
These need to be recognized as “financial liability” and classified as “other financial liabilities”.

Initial recognition
Initially they are measured at fair value plus transaction cost (e.g. legal & documentation expenses). The money received from the bank may be the initial fair value of the loan)

Subsequent measurement
Subsequently they should be measured at amortized cost using the initial effective interest rate (EIR) minus impairment.
EIR is calculated as the Internal Rate of Return (IRR) of the future cash flows of the loan.

Hope this will help you
answered Dec 2, 2012 by Mysio Level 5 Member (21,360 points)


...