U.S. GAAP Codification of Accounting Standards

U.S. GAAP Codification   Accounting Standards, ASC

U.S. GAAP Accounting Standards
Codification Topic 835-30: Imputation of Interest


Principles of Accounting Intermediate Financial AccountingU.S. GAAP Textbook
Accounting by Topic Accounting Terms Dictionary


Codification Topic 835-30
Imputation of Interest


Interest on Receivables and Payables

APB Opinion 21, August 1971
"Interest on Receivables and Payables"


Note exchanged for cash
1. Present value of the note = cash proceeds exchanged

2. If present value of the note < face amount of the note 
--> the difference is discount
--> discount is amortized using "interest method"

3. Amortization of discount
--> interest expense for note payable
--> interest income for note receivable

Example 1: Note payable
Received $1,000 in cash and issued a $1,100 note payable
Present value = $1,000
Face amount = $1,100
Discount on note payable = $100
$100 is recognized as interest expense over the period

Example 2: Note receivable
Paid $1,800 in cash and received a $2,000 note receivable
Present value = $1,800
Face amount = $2,000
Discount on note receivable = $200
$200 is recognized as interest income over the period


Note exchanged for noncash assets
1. Cost of the asset = (1) or (2) whichever is more clearly determinable
(1) fair value of the asset
(2) market value of the note

2. If cost of the asset < face amount of the note 
--> the difference is discount
--> discount is amortized using "interest method"

3. Amortization of discount
--> interest expense for note payable
--> interest income for note receivable

Example 3: Note payable
Purchased a property with $3,000 fair value and issued a $3,300 note payable
Cost of the asset = $3,000
Face amount = $3,300
Discount on note payable = $300
$300 is recognized as interest expense over the period

Example 4: Note receivable
Sold a property with $4,000 fair value and received a $4,400 note receivable
Fair value of the asset = $4,000
Face amount = $4,400
Discount on note receivable = $400
$400 is recognized as interest income over the period


Balance Sheet Presentation
1. Discount is deducted from the face amount of the note
--> Contra-asset account for note receivable
--> Contra-liability account for note payable

2. Premium is added to the face amount of the note





   Codification Topic 835
   Interest
 
Subtopics of Codification Topic 835
 
   835-10 Overall
   835-20 Capitalization of interest
   835-30 Imputation of interest
 
Accounting Terms of Codification Topic 835-10
 
 
Accounting Terms of Codification Topic 835-20
 
   Activities
   Capitalization rate
   Expenditures
   Intended use
   Interest cost
 
Accounting Terms of Codification Topic 835-30
 
   Discount
   Imputed interest rate
   Interest method
   Premium



   Other Topics at the Codification 800 
Accounting Standards Codification, ASC, Overview
 
ASC Codification Topic 805: Business Combinations
ASC Codification Topic 808: Collaborative Arrangements
 
ASC Codification Topic 810: Consolidation
ASC Codification Topic 815: Derivatives and Hedging
 
ASC Codification Topic 820: Fair Value Measurements and Disclosures
ASC Codification Topic 825: Financial Instruments
 
ASC Codification Topic 830: Foreign Currency Matters
ASC Codification Topic 835: Interest
 
ASC Codification Topic 840: Leases
ASC Codification Topic 845: Nonmonetary Transactions
 
ASC Codification Topic 850: Related Party Disclosures
ASC Codification Topic 852: Reorganizations
ASC Codification Topic 855: Subsequent Events
 
ASC Codification Topic 860: Transfers and Servicing


   U.S. GAAP Codification of Accounting Standards
Accounting Standards Codification, ASC, Overview
ASC Codification 200: Presentation
ASC Codification 300: Assets
ASC Codification 400: Liabilities
ASC Codification 500: Equity
ASC Codification 600: Revenue
ASC Codification 700: Expenses
ASC Codification 800: Broad Transactions
ASC Codification 900: Industry

U.S. GAAP by Topic
Accounting Topics








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