ipsas 29—financial instruments: recognition and measurement - IFAC

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FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT 3. Year 2: The entity recognizes the following: Dr Interest 438,700 Cr Loan 438,700 Recognition of interest using the effective interest method (CU4,386,995 × 10%) Dr Loan 750,000 Cr Bank 750,000 Recognition of interest paid on outstanding balance (CU5m × 5% + CU500,000 capital repaid) 4. Year 3: The entity recognizes the following: Dr Interest 407,569 Cr Loan 407,569 Recognition of interest using the effective interest method (CU4,075,695 × 10%) Dr Loan 1,225,000 Cr Bank 1,225,000 Recognition of interest paid on outstanding balance (CU4.5m × 5% + CU1m capital repaid) 5. Year 4: The entity recognizes the following: Dr Interest 325,826 Cr Loan 325,826 Recognition of interest using the effective interest method (CU 3,258,264 × 10%) Dr Loan 1,675,000 Cr Bank 1,675,000 Recognition of interest paid on outstanding balance (CU3.5m × 5% + CU1.5m capital repaid) 6. Year 5: The entity recognizes the following: Dr Interest 190,909 Cr Loan 190,909 Recognition of interest using the effective interest method (CU1,909,091 × 10%) Dr Loan 2,100,000 Cr Bank 2,100,000 Recognition of interest paid on outstanding balance (CU2m × 5% + CU2m capital repaid) 1279 IPSAS 29 ILLUSTRATIVE EXAMPLES PUBLIC SECTOR
FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT Calculations: Table 1: Amortization Schedule (Using Contractual Repayments at 5% Interest) Year 0 CU Year 1 CU Year 2 CU IPSAS 29 ILLUSTRATIVE EXAMPLES 1280 Year 3 CU Year 4 CU Year 5 CU Capital 5,000,000 5,000,000 5,000,000 4,500,000 3,500,000 2,000,000 Interest – 250,000 250,000 225,000 175,000 100,000 Payments – (250,000) (750,000) (1,225,000) (1,675,000) (2,100,000) Balance 5,000,000 5,000,000 4,500,000 3,500,000 2,000,000 – Table 2: Discounting Contractual Cash Flows (Based on a Market Rate of 10%) Year 1 CU Year 2 CU Year 3 CU Year 4 CU Year 5 CU Capital balance 5,000,000 4,500,000 3,500,000 2,000,000 – Interest payable 250,000 250,000 225,000 175,000 100,000 Total payments (capital and interest) 250,000 750,000 1,225,000 1,675,000 2,100,000 Present value of payments 227,272 619,835 920,360 1,144,048 1,303,935 Total present value of payments 4,215,450 Proceeds received 5,000,000 Less: Present value of outflows (fair value of loan on initial recognition) 4,215,450 Off-market portion of loan to be recognized as non-exchange revenue 784,550 Table 3: Calculation of Loan Balance and Interest Using the Effective Interest Method Year 1 CU Year 2 CU Year 3 CU Year 4 CU Year 5 CU Capital 4,215,450 4,386,995 4,075,695 3,258,264 1,909,091 Interest accrual 421,545 438,700 407,569 325,827 190,909 Interest and capital payments 250,000 750,000 1,225,000 1,675,000 2,100,000 Balance 4,386,995 4,075,695 3,258,264 1,909,091 – Payment of a Concessionary Loan IE40. The department of education makes low interest loans available to qualifying students on flexible repayment terms as a means of promoting university education.
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IPSAS 29—FINANCIAL INSTRUMENTS: R
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FINANCIAL INSTRUMENTS: RECOGNITION
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ipsas 29—financial instruments: recognition and measurement - IFAC

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