FV CALCULATION OF LOAN RECEIVABLE UNDER IAS39

How do I calculate the FV (discounting) of loan receivable using effective interest rate

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I have a loan receivable of £100k made to employees.  As long as the loans remain unpaid, employee pays interest of 5% p.a on principal amount.  How do I calculate the FV of the receivable for initial recognition purposes?  How does effective interest rate affect the FV going forward?  All this is in IAS39 but it's way too technical for me to make any sense of it.  Any help wopuld be appreciated.

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By Yalnif
20th Apr 2017 14:29

Providing the 5% paid by the employees is deemed market rate then there would be no need to calculate the PV of the loan.

If you deem 5% not to be the market rate then you would need to discount at the deemed market rate over the life of the loan.

i.e. 10% on 3 year loan of £50K
£50k x (1+%)^years
£50k x (1.1)^3
=£37,594 Capital and remaining £12,406 being interest released over life of loan.
The interest actual being paid would be posted against the account.

If no fixed term, then would need to calculate the PV under perpetuity.

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