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financial liability

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › financial liability

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by P2-D2.
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  • December 17, 2020 at 10:55 am #600182
    Noah098
    Member
    • Topics: 935
    • Replies: 352
    • ☆☆☆☆☆

    sir if a company wants to raise $100m and knows that $1m would be the issue costs, then won’t the company raise $101m? and if so would be case why then do we write financial liabilities at their fair value less any issue costs in SFP? Cause if we raise $101m then interest has to be paid on that and hence that becomes our liability (short/long term whatever that is)

    December 22, 2020 at 8:46 pm #600598
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7177
    • ☆☆☆☆☆

    Hi,

    No, we pay issue costs when we raise the money and so this reduces the amount of the financial liability.

    DR Bank $100m
    CR Financial liability $100m

    and then we pay the issue costs

    DR Financial liability $1m
    CR Bank $1m

    Thanks

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