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Accounting for long term loans under FRS 102

How to establish the current & long term liability of a long term bank loan at year end

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How can you work out the current & long term liability of a long term bank loan at year end without any information on the loan?  All we currently have is a copy of the company's 2017-18 final accounts, which were drawn up under FRS 102, and the trial balance for preparation of 2018-19 accounts.

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17th Jun 2019 21:04

To state the obvious, you need to know the terms of the loan. The current portion is the reduction in the capital balance over the next 12 months. The long term portion is the rest.

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to johngroganjga
20th Jun 2019 14:13

What is the best way of including the 'assumed interest' into the accounts, considering it was not not included in the prior year?

Should we continue to just deduct the capital repayments for the next 12 months from the total held in the accounting system; or

should we look to adding in interest to the long term element?

The accounting system shows the loan value, subsequent monthly payments being repaid and an interest journal at the end of the accounting period. Therefore one could estimate an interest rate, but not knowing the term of the loan, it might be way off.

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17th Jun 2019 21:53

If you genuinely can't get the information you'll just have to use your best estimate and review it every year.

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18th Jun 2019 08:54

What stops you asking the company or the lender (or both) for copies of loan documentation?

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By Munch
19th Jun 2019 09:53

Presumably you are not providing an audit opinion. In any case from an ethical standpoint one should review the quality of the client and relationship if they are not able or willing to provide loan documents. It is simply not possible that they are unavailable. Sounds dodgy.

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By Munch
19th Jun 2019 09:53

Presumably you are not providing an audit opinion. In any case from an ethical standpoint one should review the quality of the client and relationship if they are not able or willing to provide loan documents. It is simply not possible that they are unavailable. Sounds dodgy.

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19th Jun 2019 12:18

You need the terms of the loan
If the company hasn't got a copy the Lender will have if it is a commercial loan.

If (e.g. because it's not a commercial loan) there is an absence of paperwork, assume that the whole loan is payable on demand, therefore repayable in full within one year.

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19th Jun 2019 16:36

Many thanks for your comments. It's a new, non audit opinion, client we have just taken on. The accounts are due to be submitted by the end of this month and when we have asked for the loan agreements, they said there are no agreements for the loans on file.

We then asked the former accountants if they had this information within their files, but they confirmed they had never been provided with the information either.

I will request that they ask for copies from the lenders and if nothing comes back in good time, we will have no other option but to estimate using the information held in the accounts software.

Thank you again, it is very much appreciated.

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By JoF
to Norma123
19th Jun 2019 20:31

Sounds to me like they are just being lazy. If they do not have their bank facility letter to hand, it's a two minute call to the bank to get a copy, plus a couple of days for the post to do its thing.

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By DJKL
19th Jun 2019 20:14

Not ideal but if you know the loan balances at YE 2017 and at YE 2018 (and assume they are correct-somewhat dangerous assumption) and you can recognise in the accounts the interest charged re this particular loan (may be lots of borrowings), and you say check BOE base change between the dates (see below- assumes bases rate loan), you may be able to imply the loan terms by modelling on a spreadsheet and if you can access the bank records and see what loan repayments have been made in say your year.

https://www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp

Certainly sub optimal- why can client not get a loan statement from the bank for the year? We did not receive one re one of our loans from our bank re YE 31.12.18 and they posted out a printout to us in a couple of days, it should be a pretty simple request.

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