I have question to issue costs of 100,000 in example 2
Are they included in the effective rate?
I expected that the issue costs would be recognised in losses in P&L or as a deferred cost and then recognised in P&L over loan term. Can you explain please?
M
mrjonbainModerator·
The liability is recognised at lower level. The effective rate is consequently higher as a result of this lower recognition.
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Luqman·
I was actually expecting that the initial recognition would follow a SOFP FV method and the subsequent years will follow the amortised cost format. Why did we start immediately with amortised cost, including in year 1?
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Sean tom·
4.56% is a better EIR.
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Ronald·
So, why do they put a premium and who benefits from it? Is it the company that issues the debentures or the other party that buys them?
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rishiram·
What happened to 5% premium, please?
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adeel92·
It was in the last 2140 figure.
2,000,000 x 1.05 = 2,100,000
+ 40,000 cash paid
= 2,140,000
See the answer booklet, i think that explains it better if this isnt enough.
Are they included in the effective rate?
I expected that the issue costs would be recognised in losses in P&L or as a deferred cost and then recognised in P&L over loan term. Can you explain please?
2,000,000 x 1.05 = 2,100,000
+ 40,000 cash paid
= 2,140,000
See the answer booklet, i think that explains it better if this isnt enough.