Hi Sir, In question 3 of 2016 (Sept) paper, there was a question on interest free loan. I want to understand how is interest free loan measured?
1) At fair value (net proceed) – (specified in the lecture) or 2) As the present value of all future cash flows discounted using the prevailing market rates for similar instruments – (mentioned in the answer)
In accounting for the interest free loan we need to use substance and therefore record the initial recognition at the present value of the cash flows to record it at fair value.