IFRS reporting with regards to EIR method of discounting

[Former Member]

Hello

We have requirement in IFRS reporting with regards to EIR method of discounting ( eg Employee Loan)

Following is the requirement is detail :

If you give an employee interest free loan of Rs. 100 for 5 years, you will have to fair value the same on day one (using market rate say 5%) which will work out to say Rs.93. On day one the difference of Rs.7 will be debited to employee cost and Rs. 93 will be the loan amount.

Then every year you will have to accrue interest income at 5% and debit the loan, till the loan comes back to Rs. 100 in year 5. For this you will have to treat the loan as a interest asset and accrue interest at 5% and not change the rate every time so this is different from discounting.

My observation :

We managed to meet the requirement pardially by passing the month end provision entry vide T Code F110. But the issue is the provision entries gets reversed on the next day which should not happen.

Is there any other settings be be done do that the reversal entry will not get passed in T Code F110.

Also can you even advice me whether the requirement can be met is any other module like Treasury etc.

Regards

Atul

[Former Member]

Hi,

You should use accrual accounting to provide the period end provisions and for reversal-F110 is only for bank transactions.

When the loan is repaid post a manual entry.

Hope this solves your problem.

Regards

Ramesh

[Former Member]

Hi Atul,

1. About Interest calculation on your loan amount that can be achieved in the Interest calculation sub module in FI.

2. About the settling of the loan by 20% each year, i guess you need to pass the entry manually on this.

3. question, On day one the difference of Rs.7 will be debited to employee cost. Why are you deductin Rs 7? and what do you mean by

Regards

Paul

[Former Member]

you may be better off asking this question in a FICO forum. i don't see how this is IFRS specific. are you comparing your query/solution to a local GAAP?