Accounting For Interest Free Loans To Employees

Ariana

12 Jul, 2019

I just wander how to account for this under ifrs. What is the position for employeremployee if loan is written off or treated as termination payment not contractual.

Payroll Advance To An Employee Journal Entry Double Entry

accounting for interest free loans to employees

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Accounting for interest free loans to employees. If its for long term more than one year then there is very different treatment for it as provided in ias39. Employee interest free loan less than 10k exists after employee leaves. Providing beneficial loans which are interest free or at a rate below hmrcs official interest rate providing loans you write off charging a directors personal bills to their loan.

Our company has given an interest free loan of 50000 to a third party which is payable in 02 installments in two years without any interest. Under the accrual method of accounting at each balance sheet date the company should record any accrued interest by debiting interest receivable and crediting interest income. Relevant australian standards references in this ta alert are made to standards issued by the international accounting standards board.

The loan shall be booked on discounted value the rate of interest for discounting shall be the rate applicable for similar loans in the market. If the loan is given for short term then it ll be booked as current liability. I faced the similar situation in one of my previous companies wherein the employees were given interest free loans repayable in installments and we had to discount the expected cash flows by using a discount rate and then charge the difference to pl as employee benefit and place the same in a negative reserveprovision against the loans.

Lets say company a lends 100000 to company b repayable in full upon maturity in 3 years time at 0 when the market interest rate is 8. Technical accounting alert employee loans at low interest rates introduction the purpose of this alert is to provide guidance for accounting for low interest rate loans to employees. How to treat an interest free loan under ifrs.

When the employee makes a payment the company will debit cash and will credit interest receivable and loan to employee for the appropriate amounts. If a low interest or interest free loan is provided to a director of a company or to a member of a close corporation no taxable benefit will accrue if such loan is for. The loans contemplated in this exclusion are short term loans granted at irregular intervals to employees and not all loans merely because they are less than r3 000.

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