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
Loan modification
Re: Loan modification
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)
Re: Loan modification
Great answer!