IFRS 9 - Accounting for transaction costs after issuing bonds.

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TEE123
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Joined: 05 Mar 2021, 13:07

IFRS 9 - Accounting for transaction costs after issuing bonds.

Post by TEE123 »

Hi, if anyone could please help me understand how this works, I will present the case as follows:

Lets assume my entity issued a bond of 100M 10% interest, and they incurred transaction costs of 10 Million. As per IFRS 9, the initial recognition of the liability should be the fair value - transaction costs, aka 100-10 million. 90 million on the liability side.

The questions are:

1. what are the entries made at intial recognition?

Dr. Cash 100 Mil.
Cr. Bonds payable 90 Mil
What is the 10 Mil missing on the credit side?

2. How do we account for this subsequently with the interest and at the date of payment? Eventually we are going to have to pay back the 100 Mil, but we have 90 mil on the liability side? How is thia gonna work at repayment?


Would appreciate your help on this matter
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Marek Muc
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Re: IFRS 9 - Accounting for transaction costs after issuing bonds.

Post by Marek Muc »

Re.1 You debit cash with 90m only, remember about transaction costs

Re.2 this 10m will be accrued to liability through interest expense, have a read:
https://ifrscommunity.com/knowledge-bas ... rest-rate/
TEE123
Posts: 2
Joined: 05 Mar 2021, 13:07

Re: IFRS 9 - Accounting for transaction costs after issuing bonds.

Post by TEE123 »

Thanks Marek, I have looked at the calculations but they all pertain to examples where we are purchasing a financial asset, can anyone please assist me going through this with numbers based on a financial liability issuance?
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Marek Muc
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Re: IFRS 9 - Accounting for transaction costs after issuing bonds.

Post by Marek Muc »

calculation mechanics are the same for financial liabilities
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