Boundary with IFRS 9

Learning objectives

• Analyse the IFRS 9 / IAS 20 boundary: initial measurement of the loan under IFRS 9, with the difference accounted for under IAS 20 (10A) when it is a grant.L3
• Justify and defend in a professional file (L4) the treatment adopted for the "Boundary with IFRS 9 for below-market loans" concept, distinguishing the IFRS requirement, the case data, the teaching assumption and judgement.L4

Normative references

• IAS 20 §10AGovernment loan at a below-market rate of interest: the loan is recognised and measured in accordance with IFRS 9; the benefit, measured as the difference between the initial carrying amount of the loan determined under IFRS 9 and the proceeds received, is accounted for as a grant under IAS 20; the entity considers the conditions and obligations that have been, or must be, met when identifying the costs the benefit is intended to compensate.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

3 questions

• Four statements concern the boundary between IFRS 9 and IAS 20 for a below-market government loan. Which one is wrong?L3
• Ferrand has obtained a government loan at a reduced rate, measured under IFRS 9 at {opening_liability} at initial recognition; the difference from the proceeds received has already been treated as a grant. Case convention: the loan is subsequently measured at amortised cost, at the effective interest rate of {effective_rate}% given by the case. It pays {payment} at year-end. Calculate the interest expense and the closing financial liability.L3
• Ostrane receives EUR 1,000,000 from a public fund, repayable in five years, with annual interest of 1%. Case assumption: a comparable loan would carry a market rate of 5%. Measured under IFRS 9 at initial recognition, the loan is worth EUR 826,821. Which initial accounting is consistent with IFRS 9 and IAS 20?L4