Finance income
Classification, measurement and presentation depend on the instrument and the applicable reporting requirements. For an amortised-cost financial asset, interest revenue normally uses the effective interest method, subject to rules for credit-impaired assets. The fact that an amount is called finance income does not by itself establish its precise statement of profit or loss category under every presentation framework.
Worked example
A company holds a $10,000 loan receivable with a 6% effective annual interest rate. Assuming no payments, changes or credit impairment during the year, interest revenue is $600.
Common mistake
Using the contractual coupon without checking the effective interest rate, or treating all investment gains as interest revenue.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |