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IFRS 9

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › IFRS 9

  • This topic has 2 replies, 2 voices, and was last updated 3 years ago by thanh123.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • February 23, 2022 at 8:35 am #649171
    thanh123
    Participant
    • Topics: 44
    • Replies: 30
    • ☆☆

    Hello, I have a question about IFRS 9.

    “A loan of $60 million was taken out on 1 August 20X3 to help finance the acquisition. The
    loan carries an annual interest rate of 6%, with interest payments made annually in arrears.
    The loan will be repaid in 3 years at a premium of $5 million”

    The question:
    1) What is the premium $5m (if during 3 years, there are no interest rate charged and after 3 years, the payment of $65m)

    2) How to calculate this question, if you can, please show me the specific calculation.

    Thanks

    February 24, 2022 at 9:41 am #649254
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7177
    • ☆☆☆☆☆

    Hi,

    You are correct in your understanding of the premium, in that the loan will be repaid at $5 million above its par value of $60 million, i.e. $65 million.

    To do the accounting then we would need the effective rate of interest on the loan, which is not given in the question. You need to recognise the initial loan at $6m and then charge interest based upon the coupon rate, with the 6% annual payments reducing the amount of the loan.

    If this is all done correctly using amortised costs then the loan balance at the end of three years will be $65 million.

    Thanks

    February 27, 2022 at 12:50 pm #649450
    thanh123
    Participant
    • Topics: 44
    • Replies: 30
    • ☆☆

    thanks tutor

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    Posts
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