ipsas 29—financial instruments: recognition and measurement - IFAC

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FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT IE41. The department advanced CU250 million to various students at the beginning of the financial year, with the following terms and conditions: • Capital is repaid as follows: Year 1 to 3: no capital repayments Year 4: 30% capital to be repaid Year 5: 30% capital to be repaid Year 6: 40% capital to be repaid • Interest is calculated at 6% interest on the outstanding loan balance, and is paid annually in arrears. Assume the market rate of interest for a similar loan is 11.5%. IE42. The journal entries to account for the concessionary loan are as follows (assuming the entity subsequently measures the concessionary loan at amortized cost): 1. On initial recognition, the entity recognizes the following: Dr Loan 199,345,480 Dr Expense 50,654,520 Cr Bank 250,000,000 2. Year 1: The entity recognizes the following Dr Loan 22,924,730 Cr Interest revenue 22,924,730 Interest accrual using the effective interest method CU199,345,480 × 11.5% Dr Bank 15,000,000 Cr Loan 15,000,000 Interest payment of CU250m × 6% 3. Year 2: The entity recognizes the following: Dr Loan 23,836,074 Cr Interest revenue 23,836,074 Interest accrual using the effective interest method CU207,270,210 × 11.5% Dr Bank 15,000,000 Cr Loan 15,000,000 Interest payment of CU250m × 6% 1281 IPSAS 29 ILLUSTRATIVE EXAMPLES PUBLIC SECTOR
FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT 4. Year 3: The entity recognizes the following: Dr Loan 24,852,223 Cr Interest revenue 24,852,223 Interest accrual using the effective interest method CU216,106,284 × 11.5% Dr Bank 15,000,000 Cr Loan 15,000,000 5. Year 4: The entity recognizes the following: Dr Loan 25,985,228 Cr Interest revenue 25,985,228 Interest accrual using the effective interest method CU225,958,228 × 11.5% Dr Bank 90,000,000 Cr Loan 90,000,000 Interest payment of CU250m X 6% + CU75m capital repaid 6. Year 5: The entity recognizes the following: Dr Loan 18,623,530 Cr Interest revenue 18,623,530 Interest accrual using the effective interest method CU161,943,735 × 11.5% Dr Bank 85,500,000 Cr Loan 85,500,000 Interest payment of CU175m X6% + CU75m capital repaid 7. Year 6: The entity recognizes the following: Dr Loan 10,932,735 Cr Interest revenue 10,932,735 Interest accrual using the effective interest method CU95,067,265 × 11.5% Dr Bank 106,000,000 Cr Loan 106,000,000 Recognition of capital repaid IPSAS 29 ILLUSTRATIVE EXAMPLES 1282
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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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