Shareholder loan

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Xandrea
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Joined: 05 Jul 2021, 08:45

Shareholder loan

Post by Xandrea »

Hi All

Just hoping to clarify something regarding interest free + repayable on demand loans from holding company. The loans was at repayable on demand upon inception, the fair value at inception is therefore the face value and no discounting is required when the debt is recognized. At year end, the holding company provide a letter indicating that they will provide unconditional right to the company to defer the loan for the next 12 months, hence the loans is therefore classified as non current for working capital presentation in the balance sheet at the face value.

Does this create any fair value issues? or we are able to apply the basis that 12 months is not a material financing period?

Appreciate any feedback.

Thanks

Xandrea.
Leo
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Joined: 05 Apr 2020, 22:31

Re: Shareholder loan

Post by Leo »

I would just classify it from current to non current without changing the carrying amount to fair value but

Academically, you should, which means at least take the market interest rate and discount it for one year and debit the borrowing for the delta and credit equity.
JRSB
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Re: Shareholder loan

Post by JRSB »

your approach is quite typical and traditionally accepted as a way to put as non-current without discounting...
as long as the deferment is genuine, ie matched in cf forecasts and the parent can afford to make that commitment.
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Marek Muc
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Re: Shareholder loan

Post by Marek Muc »

If you want to see what would be the impact, this section applies to your scenario:

https://ifrscommunity.com/knowledge-bas ... ecognition
Leo
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Re: Shareholder loan

Post by Leo »

Is it correct to say that all loan/borrowings are initially recognised at fair value, and subsequently amortised by using the amortised cost ?

I mean when in the literature is says "when a financial liability measured at amortised cost", it means what I wrote above ?
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Marek Muc
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Re: Shareholder loan

Post by Marek Muc »

Yes, initial recognition is always at fair value, subsequent measurement can be at fair value or amortised cost depending on classification
Leo
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Re: Shareholder loan

Post by Leo »

thanks, very much appreciated !
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