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Accounting Update - March 2011
Accounting Update - March 2011
06-Apr-2011
– Accounting for Interest Free Loans
In this addition of Accounting Update we:
Consider how the lender and the borrower should account for interest free loans. Interest free loans are often provided to not-for-profit entities or related parties within a group, for example, subsidiaries.
When accounting for interest free loans the following two issues should be considered.
- measurement (that is, what is the fair value of the interest free loan);
- recognition (that is, what is the reason(s) for the loan and who are the parties involved).
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