Treatement of waiver of loan and accumulated interest
This query is : Resolved
19 May 2012
A company has taken loan from finantial Instutation but because of its poor finantial position it fails to repay the loan and interest.
As per the CDR some portion of loan and interest amount has been waived off.
What would be the accounting treatement of Waiver of Loan ,Interest and penal Interest.
Please specify the AS if any applicable.
As per the CDR some portion of loan and interest amount has been waived off.
What would be the accounting treatement of Waiver of Loan ,Interest and penal Interest.
Please specify the AS if any applicable.
19 May 2012
The subject would need more details..
To answer your query, the company would record gain on extinguishment of interest liability through income statement.
Similar for the portion of loan balance that is waived in CDR scheme.
Any penal interest paid can have two interpretation in the way it is documented / worded in the CDR scheme.
1. Penal interest is an expense in the income statement considering it to be exit fee;
2. if Considered similar to upfront then amortise over the new loan term.
To answer your query, the company would record gain on extinguishment of interest liability through income statement.
Similar for the portion of loan balance that is waived in CDR scheme.
Any penal interest paid can have two interpretation in the way it is documented / worded in the CDR scheme.
1. Penal interest is an expense in the income statement considering it to be exit fee;
2. if Considered similar to upfront then amortise over the new loan term.
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