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I know this is an impairment of financial asset but i am struggling with how to deal with this:
The financial assets balance relates to $15 million that was loaned to a key supplier
on 1 January 20X5. The loan, which is interest-free, is due to be repaid on 31
December 20X6. The supplier can usually borrow at a rate of 15%. Any loss allowance
is deemed to be immaterial.Do we reclassify the loan to FV at Jan X5 (15 X 1/1.15sqd) = 11.342M but then i am struggling with what we need to do to prepare the SOFP as at 31 December X5?
Do we Cr Asset Dr P&L with 3.658 at Jan X1
And then Dr Asset and Cr P&L at Dec X1 with 1.701M as at Dec X5 (rough Numbers)Any Help Would Be Great.
its interest free yes but the 15m now and 15 two years time will be different so we discount the 15 million for the two years by the 15% and the unwinding of interest goes to p&l for each of the two years. non current liability created for the discounted 15 million and adjusted by the unwinding of interest for each year.
Jigsaw, you’re wrong! This is a financial asset that we’re talking about so the concept of showing it as a non-current liability is total hogwash
k0006825, yes, impair and then build back up to $15 million over two years in anticipation of the receipt of the money in repayment of the interest free loan
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