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How do you provide for a combination of different term loans with a facility product or a revolving product?
in IAS 37 - Provisions, Contingent Liabilities and Contingent Assets by
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suppose an entity enters into an arrangement with a bank on 1.1.X1 that obliges it to borrow and the bank to lend $1m on 31.12.X1, repayable on 31.12X6. An upfront fee of $50,000 is paid to the bank. The loan carries a fixed interest rate of 10%. This is a market interest rate for the entity in question taking into consideration the upfront fee. The 10% rate reflects market conditions and the entity's credit rating at 1.1.X1. No other fees are incurred.

Then as per given sitiuation, following would be the accounting entires
Borrower accounting - 1.1.X1 (commitment date)
Debit: Prepaid borrowing fee – asset $50,000
Credit: Cash $50,000
Borrower accounting - 31.12.X1 (loan date)
Debit: Credit
Cash $1,000,000
Credit: Prepaid borrowing fee - asset $50,000
Financial liability $950,000
by Level 5 Member (11.3k points)


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