Recognition of interest income of Unquoted Unsecured Debenture

Question

Company has unsecured unquoted debenture (Under Loan and receivable category in financial statement), which doesn’t recognized amortized cost using effective interest rate (From 2007), due to the uncertainty of recoverability, but in this year (2016) company going to account whole interest as this year income instead of correcting the error.

Is this correct way of recording the interest income for the given scenario?

Answer 1

The company should have recorded financial assets (under loans and receivables category) at amortised cost. If there was a doubt of recoverability, it could be covered by recording an impairment loss. Therefore, this constitutes an accounting error within the meanings of IAS-8 and should be corrected retrospectively.

Comments

Thank you for your valuable time to answer my question.