I have read entire IAS 32 & 39, but I am confused in the following 2 DOUBTS :
1) Transaction cost on issue of equity shares is deducted from Equity..But what would be effect of transaction costs on issue of bonds, loan note, etc..??
2)Financial Liability: Treatment of difference between Amt taken as loan & fair value!!Eg 800 lacs i took as loan, but using market rate its present value is 676 lacs..so how to treat the diff. amt..?
Please help!!
Hi,
As regards Querry No. 1 -
It will be generally FInancial Instrument at "Amortised cost" and hence issue cost will be adjusted to calculate the amortisation. Say for e.g calculation may look like following -
PV of Bond Proceeds at effective rate of interest - Issue costs + Int @ effective rate - contractual interest = Closing Balance.
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