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Forensic Accounting

Can a short term loan of 1 year to unrelated party requires discounting at the beginning?


Our company has given a loan to unrelated party for 1 year without interest.

Are we supposed to record loan at the transaction value or at discounted value as in the beginning of the period.

asked Mar 14 in IFRS 9 - Financial Instruments by Raj

1 Answer

0 votes
A discount loan is a loan that does not require the payment of interest or any other charges; rather, a discount loan deducts the interest and/or other charges from the face amount of the loan when it is given out. That way, the person taking out the discount loan receives less. For example, a discount loan of $1,000 might yield only $930 for the borrower to use. The other $70 would be interest and/or other charges. When it comes time to repay the discount loan, the borrower must pay the full face amount; in our example, this is $1,000. Generally, only a short-term loan can be offered as a discount loan. It is usually paid back in one lump sum.
answered Mar 14 by veshmalahotra Level 3 Member (7,480 points)



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