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Loan Receivable: If Origination Fees Are Received From The Borrower, Record It As Unearned Interest Income
Loan Receivable: If Origination Fees Are Received From The Borrower, Record It As Unearned Interest Income
Principal Amount xx
Less: Origination fee received (xx)
Effective interest rate using interpolation
Add: Direct origination cost xx
Initial Present Value or CA xxx
X = Lower Rate + [HR – LR] x
Subsequent Measurement
amortized cost using effective interest
rate method
** since LR frequently involves
transaction costs, a new effective rate
should be computed through
interpolation
GOLDEN RULE
“the higher the interest rate, the lower
the present value”