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Hi Mike,
What does the following sentence mean?
The carrying amount of the loan (received) is subsequently increased by amortisation of transaction costs against accounting profit.
Where the carrying amount is proceeds received less transaction costs.
THank you for your help in advance.
Stefano
But, when we record the loan at face value less transaction costs, we’re still going to have to pay the full value of the loan on redemption date.
So, over the period of the loan, we’re going to expense the statement of profit or loss and credit the loan account until, on redemption date, the carrying value of the loan on the credit side of the loan account is the full amount payable
Is that better?
ehm I thought we would only expense the statement of profit and loss with interests on the loan. The loan itself it is a capital payment and would be recorded as a liability. As we make a repayment we would debit the loan account and credit cash. However, what I seem to understand now is that when we expense the profit and loss statement with the transaction costs we credit the loan account and that would result in an increase of the carrying amount of the loan.
I would appreciate your opinion on the above.
Thank you very much,
Stefano
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