|
Debt instruments, like loans and other accounts receivable and payable, are initially measured at present value
of the future payments and subsequently at amortised cost using the effective interest method. Debt
instruments that are payable or receivable within one year, typically trade payables or receivables, are
measured, initially and subsequently, at the undiscounted amount of the cash or other consideration, expected
to be paid or received. However if the arrangements of a short-term instrument constitute a financing
transaction, like the payment of a trade debt deferred beyond normal business terms or financed at a rate of
interest that is not a market rate or in case of an outright short-term loan not at market rate, the financial asset
or liability is measured, initially and subsequently, at the present value of the future payment discounted at a
market rate of interest for a similar debt instrument.
|