Question: present your calculations and answers to the following cases and...
Present your calculations and answers to the following cases and identifying the relevant considerations and main measurement criteria, both for IFRS and US GAAP, applicable to each situation:
Fairclough plc borrowed $10 million from a bank on 1/Jan/2011. The fee of $100,000 was charged by the bank which was paid by Fairclough plc at the inception of the loan. The terms of the loan are:
1) Interest of 6% until 31/Dec/2013
2) Interest droupping to 5% from 31/Dec/2013 to 31/Dec/2015
1) Repayment of 5% million on 31/Dec/2013
2) Repayment of 5% million on 31/Dec/2015
interest is paid annually in arrears.
The effective yield on the loan is 6.07%
Required to answer:
a) what is the total finance cost on the loan over the five year period ( under IFRS and US.GAPP separately)
b) What will be reflected as a liability in the financial statement for each 31/Dec year-end and what interests costs will be recognized in the statement of comprehensive income? ( under IFRS and US.GAPP separately)