Notes Receivable

Question 1

What are notes receivable?

Answer 1

A contract/ formal promise to pay - written agreement

Question 2

Provide the initial measurement for notes receivable

Answer 2

Are assets which the issuing company controls the right to an economic benefit
IFRS 9 - Require issuer to recognize notes receivable asset of legal right to receive cash
Need to factor in the interest rate

Question 3

What is the non-interest-bearing note

Answer 3

Notes are initially recorded at present value plus transaction cost
*Use excel N = number of year, I/Y = market or effective rate of interest per period, PMT = payment per period, PV= present value, FV = future value

Question 4

What are the notes receivable measured at

Answer 4

It is measured as an amortized cost

Question 5

How is amortized cost calculated

Answer 5

1. Amount of the asset originally recognized
2. • interest to date, using effective interest rate
3. Less payment received obligation

Question 6

When are notes receivable derecognized

Answer 6

Once the payment has been received on the normal course of business
Or if there is reasonable consideration that the note will need to be written off as it can’t be recovered

Question 7

Provide the difference with ASPE

Answer 7

ASPE 3856 - can use either the effective interest method or the straight-line method for recording interest revenue