INITIAL AND SUBSEQUENT MEASUREMENT OF NOTE PAYABLE

NOTE PAYABLE ISSUED SOLELY FOR CASH

INTEREST-BEARING NOTE PAYABLE ISSUED FOR PROPERTY
NONINTEREST-BEARING NOTE PAYABLE ISSUED FOR PROPERTY
FAIR VALUE OPTION OF MEASURING NOTE PAYABLE

INTERMEDIATE ACCOUNTING PART 2

 NOTE PAYABLE
A promissory note is an unconditional promise in writing made by
one person to another, signed by the maker, engaging to pay
on demand or at a fixed or determinable future time a sum
certain in money to order or to bearer.

TYPES AND MEASUREMENT OF BONDS

BOND PREMIUM AND DISCOUNT
METHODS OF AMORTIZING PREMIUM AND DISCOUNT
FAIR VALUE OPTION
EFFECTIVE INTEREST METHOD
ACCOUNTING FOR COMPOUND FINANCIAL INSTRUMENTS

INTERMEDIATE ACCOUNTING PART 2

 NOTE PAYABLE - INITIAL MEASUREMENT
Fair value - transaction costs (directly attributable
Note payable not designated at FVPL to the issue of the note payable)

Note payable is irrevocably designated at Fair value

fair value through profit or loss **Transaction costs are expensed immediately

FAIR VALUE - PRESENT VALUE OF THE FUTURE CASH PAYMENTS TO SETTLE

THE NOTE PAYABLE USING MARKET RATE OF INTEREST.
TYPES AND MEASUREMENT OF BONDS
BOND PREMIUM AND DISCOUNT
METHODS OF AMORTIZING PREMIUM AND DISCOUNT
FAIR VALUE OPTION
EFFECTIVE INTEREST METHOD
ACCOUNTING FOR COMPOUND FINANCIAL INSTRUMENTS

INTERMEDIATE ACCOUNTING PART 2

 NOTE PAYABLE - SUBSEQUENT MEASUREMENT
At amortized cost using effective interest method.
At fair value through profit or loss if the note payable
is designated irrevocably as measured at fair value
through profit or loss.

TYPES AND MEASUREMENT OF BONDS

BOND PREMIUM AND DISCOUNT
METHODS OF AMORTIZING PREMIUM AND DISCOUNT
FAIR VALUE OPTION
EFFECTIVE INTEREST METHOD
ACCOUNTING FOR COMPOUND FINANCIAL INSTRUMENTS

INTERMEDIATE ACCOUNTING PART 2

 AMORTIZED COST OF NOTE
PAYABLE
The amortized cost of note payable is the amount at which the note
payable is measured initially:

a. Minus principal repayment

b. Plus or minus the cumulative amortization using the effective interest
method of any difference between the face amount and present value
of the note payable.

TYPES AND MEASUREMENT OF BONDS

BOND PREMIUM AND DISCOUNT
METHODS OF AMORTIZING PREMIUM AND DISCOUNT
FAIR VALUE OPTION
EFFECTIVE INTEREST METHOD
ACCOUNTING FOR COMPOUND FINANCIAL INSTRUMENTS

INTERMEDIATE ACCOUNTING PART 2

 SUMMARY OF TRANSACTIONS UNDER NOTE
PAYABLE

Note issued solely for cash Present value = cash proceeds

The property or asset is recorded at the

Interest bearing note issued for property
purchase price.

Noninterest bearing note issued for The property is recorded at the cash
property price (PV of the note) of the property.

TYPES AND MEASUREMENT OF BONDS

BOND PREMIUM AND DISCOUNT
METHODS OF AMORTIZING PREMIUM AND DISCOUNT
FAIR VALUE OPTION
EFFECTIVE INTEREST METHOD
ACCOUNTING FOR COMPOUND FINANCIAL INSTRUMENTS

INTERMEDIATE ACCOUNTING PART 2

 FAIR VALUE OPTION OF MEASURING NOTE PAYABLE
Initial recognition: irrevocably designated as at fair value
through profit at loss.

Gain or loss on financial liability designated at fair value

through profit or loss shall be accounted for as follows:

a. The change in fair value attributable to the credit risk is

recognized in other comprehensive income.
b. The remaining amount of the change in fair value
recognized in profit or loss.
TYPES AND MEASUREMENT OF BONDS
BOND PREMIUM AND DISCOUNT
METHODS OF AMORTIZING PREMIUM AND DISCOUNT
FAIR VALUE OPTION
EFFECTIVE INTEREST METHOD
ACCOUNTING FOR COMPOUND FINANCIAL INSTRUMENTS

INTERMEDIATE ACCOUNTING PART 2

 FAIR VALUE OPTION OF MEASURING NOTE PAYABLE
any transaction cost is recognized as outright expense.
there is no amortization of discount and premium on note
payable.
interest expense is recognized using the nominal or stated
interest rate.

TYPES AND MEASUREMENT OF BONDS

BOND PREMIUM AND DISCOUNT
METHODS OF AMORTIZING PREMIUM AND DISCOUNT
FAIR VALUE OPTION
EFFECTIVE INTEREST METHOD
ACCOUNTING FOR COMPOUND FINANCIAL INSTRUMENTS

INTERMEDIATE ACCOUNTING PART 2