IFRS9 - Below market rate with fee and cost treatment

[NichchaK]

I understand that for below market rate, we need to apply the market rate as EIR. Do we need to classify fee and cost as unamortized fees and costs with market rate or we can include in loan amount or record directly to PL on the first initial date for fees and cost.

[Marek Muc]

How do you plan to recognise the difference between fair value and cash paid/received? What's your scenario?

[JakobLavrod]

Apart from echoing Marek's point of needing more information and context, I would probably recommend calculating an EIR of the loan by including all fees and costs. If the EIR you get is at "market rate", then the loan is no longer below market rate

[Marek Muc]

Haha good point! I've seen offers of consumer loans with 0% interest but 20% of commission

[JakobLavrod]

On the same theme: In Sweden, where I operate, it is legal to call a loan "interest-free", even though it has the same contractual cash flows as an annuity loan with interest, which is quite unfortunate from a consumer information point of view.

[Marek Muc]

In Poland we have a law that requires every entity to state the "real annual rate" in any loan ad/offer. This real rate takes all costs into account.

e.g. this ad with 0% commission (RRSO = real rate)