Loan modification

All topics related to IFRS Standards.
Post Reply
Xandrea
Posts: 12
Joined: 05 Jul 2021, 08:45

Loan modification

Post by Xandrea »

Hi All

I have an existing loan from parent due 31 Dec 2021 (from 1 Jan 2015 to 31 Dec 2021) with interest 5% per annum. During the year, the maturity date of the loan was extended to 31 Dec 2022, with all other term remain unchanged. Will like to know if this constitute a debt modification and require modification accounting to be consider?

Regards
Xandrea
DJP
Trusted Expert
Posts: 345
Joined: 26 Jun 2020, 15:57

Re: Loan modification

Post by DJP »

Extending the maturity of the loan for 1 year is unlikely to fail the 10% derecognition test. This shall be treated as a modification. The new cash flows shall be discounted using the original effective interest rate and any difference shall be taken to P&L. (see IFRS 9 B5.4.6)
JRSB
Trusted Expert
Posts: 1309
Joined: 01 Mar 2020, 01:10
Location: UK

Re: Loan modification

Post by JRSB »

Great answer!
Xandrea
Posts: 12
Joined: 05 Jul 2021, 08:45

Re: Loan modification

Post by Xandrea »

Thanks !
Post Reply