in General IFRS Discussion by
Bank A has receivable from Bank B in the amount of 3,5 mln from normal trading operations.

Bank A has made decision to purchase Bank B credit portfolio for the 4 mln but Bank B transferred credit portfolio in the amount of 5 mln. Bank A considers that Bank B is a problematic bank and will not receive its amount due from Bank B and want to resolve this issue in a different way.

Bank A has made the following entry in its accounts.

Dr. Loan receivable – 5mln
Cr. Receivable form bank B 3.5
Cr. Cash  0.5 mln
Cr Loan receivable ( contra account) -1 mln

Subsequently Bank A made this double entry to recognize income gained from purchased loan portfolio based on effective interest rate method.

D-r Loan receivable ( contra account)
C-r Interest income

My question is that is this approach right or not. If not what your opinion or comment will be on the above stated issue.

Thank you in advance.

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1 Answer

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by Level 2 Member (4.9k points)
I would certainly not go with this answer because the amount receivable from bank B is 3.5 mln and how can we book receivables as 5 mln. Keeping in view the IAS 39 and IFRS 9; the accounting treatment for this will be as follows;

Credit Portfolio from Bank B (Dr) 5 mln
Loan Receivable from bank B (Cr) 3.5 mln
Cash Amount Paid (Cr) 1.5 mln

With reference to this transaction; a very simple understanding reflects here is that bank A has received account receivables from bank B of amount 3.5 mln in the name of credit portfolio while additional 1.5 mln amount have been paid by bank A

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