IFRS 9 Loan Payments

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sgaccountant
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Joined: 25 Feb 2022, 10:25

IFRS 9 Loan Payments

Post by sgaccountant »

Hello,

I am trying to understand the treatment for changes in loan payments.

<Please refer to the attached PDF>
At initial measurement, loan receivable was calculated with expectations of loan being paid only at the year of the loan expiry in 6 years time.

However, in year 2, the loan was paid partially. Hence I remeasured the loan receivable amt to the PV of the new payment cashflows which results in a gain on loan. Is my accounting entries correct for year 2? Is this gain considered interest income?
Attachments
loan payment example.pdf
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Leo
Posts: 908
Joined: 05 Apr 2020, 22:31

Re: IFRS 9 Loan Payments

Post by Leo »

Are you sure that this loan bear no interest so every year there isn't cash from interest that comes in ?
sgaccountant
Posts: 9
Joined: 25 Feb 2022, 10:25

Re: IFRS 9 Loan Payments

Post by sgaccountant »

There is interest but as the loan is an intercompany loan, there's no loan/interest payments needed until expiry. Are my entries correct in such a situation?
Leo
Posts: 908
Joined: 05 Apr 2020, 22:31

Re: IFRS 9 Loan Payments

Post by Leo »

What's the initial amount, interest rate (is 5% market rate or nominal interest rate?), is there any transactions costs ? and does the interest will be carried forward producing interest on itself ?
JRSB
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Location: UK

Re: IFRS 9 Loan Payments

Post by JRSB »

have you reversed engineered a final £1200 repayment, charging 5% interest, to get to an initial loan of £895?
Leo
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Joined: 05 Apr 2020, 22:31

Re: IFRS 9 Loan Payments

Post by Leo »

Yea, the initial amount seems weird, I've mostly seen intercompany loan with rounded numbers. 1 200 LC seems like the initial amount ?
Leo
Posts: 908
Joined: 05 Apr 2020, 22:31

Re: IFRS 9 Loan Payments

Post by Leo »

sgaccountant I would do it the simple way, if the initial amount is really 895.46 and interest rate is 5% than the first year I would :
Dt Loan 895.46
Cr cash 895.46

at 31.12.N:
Dt Loan 45
cr interest 45

at 01.01.N+1:
dt cash 50
cr loan 50

at 31.12.N+1 :
dt Loan 45 (940-50)*5%
cr interest 45
sgaccountant
Posts: 9
Joined: 25 Feb 2022, 10:25

Re: IFRS 9 Loan Payments

Post by sgaccountant »

JRSB wrote: 14 May 2022, 18:00 have you reversed engineered a final £1200 repayment, charging 5% interest, to get to an initial loan of £895?
Yes it was reversed engineered just for illustration purpose.
sgaccountant
Posts: 9
Joined: 25 Feb 2022, 10:25

Re: IFRS 9 Loan Payments

Post by sgaccountant »

Leo wrote: 14 May 2022, 18:14 sgaccountant I would do it the simple way, if the initial amount is really 895.46 and interest rate is 5% than the first year I would :
Dt Loan 895.46
Cr cash 895.46

at 31.12.N:
Dt Loan 45
cr interest 45

at 01.01.N+1:
dt cash 50
cr loan 50

at 31.12.N+1 :
dt Loan 45 (940-50)*5%
cr interest 45
This looks interesting. May I ask how will your amortisation table clear to 0 without revising the liability amount?

I have uploaded my calculations excel here for reference https://www.mediafire.com/file/to96zymj ... .xlsx/file
Leo
Posts: 908
Joined: 05 Apr 2020, 22:31

Re: IFRS 9 Loan Payments

Post by Leo »

I'm going to receive 1 136 at year 6 not 1 150, simply because I've received 50 at the end of year 1 so for the period after year 1, I won't receive any interest capitalisation related to the reimbursement of the 50. That makes it 50 * 1.05^5 = 64 LC, and 1 200 - 64 = 1 136.

Does it make sense ?
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