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Hi Tutor,
In answer issued by ACCA for Question 1-d of SBR March 2020, I do not understand why:
“The carrying amount of the bonds at 31 December 20X4 would be $9,953,175 ($10,300,000 – $346,825)”I’ve confused of this conclusion because:
– The accumulated ECL = $356,825, in which $10,000 is ECL in 20X3, others are ECL in 20X4.
– Carrying amount of the bond as at 31 Dec 20X4 under amortised cost = $ 10.3 mil
=> Net carrying amount of the bond as at 31 Dec 20X4 should be = $10.3 mil – $356,825, which is accumulated ECL rather than only minus the ECL impacting to P&L in 20X4.Thanks alot.
I am looking at the question now on the a ACCA website. It says that the closing value of the bond is 10,300,000-356,825. I think you may have misread the answer
Please help revisit ACCA website, on the last line of answer for Question 1.d. I also copied for your review, I would remind you about the last sentence of this paragraph:
“The expected loss allowance should be increased to $356,825 with an expense recorded in profit or loss of $346,825 ($356,825 – $10,000). The loss allowance is deducted directly from the bonds with future interest income recorded on the gross position. The carrying amount of the bonds at 31 December 20X4 would be $9,953,175 ($10,300,000 – $346,825).”
I am copying and pasting:
The expected loss allowance should be increased to $356,825 with an expense recorded in profit or loss of $346,825 ($356,825 – $10,000). The loss allowance is deducted directly from the bonds with future interest income recorded on the gross position. The carrying amount of the bonds at 31 December 20X4 would be $9,943,175 ($10,300,000 – $356,825).
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