After the implementation of FRS 39, inter-company loans & staff loans borrowed at preferential rates, the fair value of the consideration given would not be the same as the actual amount (cash) given. In fact, the fair value of such loans is the present value (NPV) of all expected future cash receipts discounted at market interest rate ( estimated at the time of disbursement) for a similar loan.
After the discounting process with market interest rate, the present value will be lower than its actual amount given; the difference is not a financial asset unless it qualifies for recognition as an asset under another applicable standard (e.g. FRS 38 Intangible Assets)
Tuesday, June 19, 2007
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1 comment:
Thanks for your post, I would like to know more about the staff loans at preferential rates. How is the difference between the loan advanced and the PV at market rates treated? is it recognised as a deferred expense to be recognised to employee benefits over the period of the loan?
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