Good day,

Could you tell how we record loans interest should I have provision then I amortize it on yearly basis or should I record the interest expense at the end of each year according to IAS what should I do.

Regard.

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Hi Amir,

 

 

First of all you need to make an estimation of what’s going to be the real lifetime of that contract which will be different than the nominal life. Then based on the net cashflows taking into consideration the original payment plan and any commissions/subventions, you have to recalculate the IFRS Effective Rate. Then once you have that rate you need to recalculate the IFRS payment plan based on the estimated lifetime of the contract.

 

In this way you record in each period the part of interest income, interest expense and any costs which corresponds to that contract. If they payment by the customer hasn’t been done then you accrue for the income part and also the interim part.

 

Regards,

Marc