IFRS 1-Effective interest method

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waletilahun
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Joined: 28 Feb 2020, 12:42

IFRS 1-Effective interest method

Post by waletilahun »

I am working on IFRS 1 conversion and I face a challenge in applying IFRS9.

Here is the case ... My client uses floating interest rate for its loans which is determined by fixed + LIBOR interest rate on monthly basis.

The loan is in the middle of half maturity with 10yrs term...

The loan payment will be affected by the interest in the loan bases in the LIBOR rate plus the fixed and additional loans granted.

Upon year end financial statements presentation I calculate EIR and I detection present value of the loan...

Will I apply the EIR for the life of the loan starting from loan conception (10years) or to the remaining life of the loan (5years)?

Thanks
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Marek Muc
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Re: IFRS 1-Effective interest method

Post by Marek Muc »

you need to take full retrospective approach and go back 10 years to initial recognition, see para. IG57 of IFRS 1:
For those financial assets and financial liabilities measured at amortised cost in the opening IFRS statement of financial position, an entity determines the gross carrying amount of the financial assets and the amortised cost of the financial liabilities on the basis of circumstances existing when the assets and liabilities first satisfied the recognition criteria in IFRS 9.
waletilahun
Posts: 4
Joined: 28 Feb 2020, 12:42

Re: IFRS 1-Effective interest method

Post by waletilahun »

Thanks.
Is this life time (starting from IFRS 9 application or after IFRS 1 implementation) consideration apply for subsequent EIR change or financial liabilities and asset measurement?

i.e. upon IFRS1 adoption I will apply full life of the financial liabilities with the floating rate.

Is it full life (including retrospective balances) apply for the next financial mliabilities measurement?
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