Loan Receivable Flashcards
A financial asset arising from a loan granted by a bank or other financial institution to a borrower or client.
LOAN RECEIVABLE
Initial measurement of a loan receivable
Fair value plus transaction cost
Direct origination costs should be included in the initial measurement of the loan receivable.
However…
Indirect origination costs should be treated as outright expense.
Subsequent measurement of loans receivable is…
Amortized cost using the effective interest method.
The fees charged by the bank against the borrower for the creation of the loan are known as…
ORIGINATION FEES
The amount of impairement loss can be measured as…
The difference between carrying amount and the present value of estimated future cash flows that is discounted at the ORIGINAL EFFECTIVE RATE.
Impairment Loss is equal to…
Carrying Amount (LOAN)
Less: PV of Cash Flows
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Impairment Loss
Rate to use in discounting PV of Cash Flows…
Original Effective Rate
