Hey ,
I'm trying to understand if there is banking industry standard on accounting for Overdrafts under IFRS 9. We've issued overdrafts, but I can't understand how you can calculate an EIR on them as the balance changes sometimes every day, so the cashflows are unpredictable and not contractual. I'm assuming the simple interest method is used, as I believe even if you did calculate an EIR, every month end you'd have to recalibrate/modify it based on unexpected cashflows and true-up to the new carrying value...which i also believe would be comparable to the simple interest!
Any help or guidance would be appreciated as I can't find any information that covers overdrafts.
Thanks!
IFRS 9 - Calculating EIR on Overdrafts
Re: IFRS 9 - Calculating EIR on Overdrafts
hi, this is similar to revolving credit facilities that we discussed some time ago:
viewtopic.php?f=4&t=200
the conclusion was that interest is accrued on straight-line basis and any fees are amortised over the duration of credit facility
viewtopic.php?f=4&t=200
the conclusion was that interest is accrued on straight-line basis and any fees are amortised over the duration of credit facility