- 4 Marks
CR – Nov 2018 – L3 – Q2e – Financial instruments: Recognition and measurement Corporate reporting
Discuss the accounting treatment of a variable rate loan commitment under IFRS 9 in the financial statements of Garu-Tempane Ltd.
Question
Garu-Tempane Ltd had the following transaction during the year ended 31 December 2018:
The entity entered into a contractual commitment to make a variable rate loan to a customer beginning on 1 January 2019 for a fixed period at 1% less than the rate at which the entity (not the customer) can borrow money.
Required:
Advise the directors of Garu-Tempane Ltd on the accounting treatment of the above transaction under IFRS 9: Financial Instruments for the year ended 31 December 2018.
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