d) Preparing and processing the
documents related to the loan
Loan receivable is a financial asset arising
from a loan granted by a bank or other
financial institutions to a borrower or client
MEASUREMENT
A. INITIAL MEASUREMENT
At fair value plus transaction costs that
are directly attributable to the acquisition
of the financial asset
→ Fair value – normally is the transaction
price or the loan granted
→ Transaction cost
- Includes direct origination cost
- Should be included in the initial
measurement of the loan
- Indirect origination cost should
be expensed outright
B. SUBSEQUENT MEASUREMENT
At amortized cost using the effective
interest method
Origination fees
IMPAIRMENT OF LOAN
- Fees charged by the bank against the
borrower for the creation of the loan
- Origination fees include compensation for
the following activities (Valix, Peralta, &
Valix, 2020):
a) Evaluating the borrower’s
financial condition
b) Evaluating guarantees,
collateral and other security
c) Negotiating the terms of the
loan
e) Closing and approving the loan
transaction
→ Origination fees received from
borrower
- Recognized as unearned
income and amortized over the
term of the loan
→ Direct origination cost
- Origination fees not chargeable
against the borrower
- Deferred and also amortized
over the term of the loan
- Preferably, offset directly
against any unearned
origination fees received
→ Origination fees received > direct
origination cost
- Difference is unearned interest
income
- Amortization will increase
interest income
→ Origination fees received < direct
origination cost
- Difference is charged to direct
origination costs
- Amortization will decrease
interest income
• An entity shall recognize a loss
allowance for expected credit losses
on a financial asset that is measured
amortized cost
• An entity shall measure the loss
allowance for a financial instrument at
an amount equal to the lifetime
expected credit losses if the credit risk
on that financial instrument has
increased significantly since initial
recognition.
 Credit loss
- The difference between all contractual
cash flows that are due to an entity in
accordance with the contract and all
the cash flows that the entity expects to
receive (ie all cash shortfalls), (Valix, Peralta, & Valix, 2020)
discounted at the original effective
interest rate (or credit-adjusted Stage 1
effective interest rate for purchased or
- This stage covers debt instruments that
originated credit-impaired financial
have not declined significantly in credit
assets)
quality since initial recognition or that have
Lifetime expected credit losses
low credit risk
- The expected credit losses that result - A 12-month expected credit loss is
from all possible default events over the recognized
expected life of a financial instrument.
- When measuring expected credit Stage 2
losses, an entity should consider:
a. the change in the risk of a default - This stage covers debt instruments
that have declined significantly in credit
occurring since initial recognition;
quality since initial recognition but do not
b. the expected life of the financial
have objective evidence of impairment
instrument; and
- A lifetime expected credit loss is
c. reasonable and supportable recognized
information that is available - There is rebutable presumption that there is
without undue cost or effort that a significant increase in credit risk if the
may affect credit risk. contractual payments are more than 30
• The amount of impairment loss can be days past due
measured as the difference between the
carrying amount and the present value of Stage 3
estimated future cash flows discounted at
- This stage covers debt instruments that
the original effective rate. (Valix, Peralta, &
have objective evidence of impairment at
Valix, 2020)
the reporting date
• The carrying amount of the loan - A lifetime expected credit loss is recognized
receivable shall be reduced directly or
through the use of an allowance account 12-month expected credit loss

- PFRS 9 provides that it is “the portion of

lifetime expected credit losses that
represent the expected credit losses that
result from default events on a financial
instrument that are possible within the 12
months after the reporting date.”
Lifetime expected credit loss

- PFRS 9 provides that it is “the expected

credit losses that result from all
possible default events over the
expected life of a financial
instrument.”
- It shall always be recognized for trade
receivables through aging,
percentage of accounts receivable,
and percentage of sales

Interest income

a) Under stages 1 and 2, interest income

is computed based on the gross
carrying amount or face amount
b) Under stage 3, interest income is
computed based on the net carrying
amount which is equal to the gross
carrying amount or face amount
minus allowance for credit loss