U.S. GAAP Codification of Accounting Standards

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


Principles of Accounting Intermediate Financial AccountingU.S. GAAP Textbook
IFRS,  IFRS Dictionary IFRS U.S. GAAP Comparison IFRS Texbook
Securities Law Library,  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


International Financial Reporting Standards (IFRS)

   IAS 23: Borrowing Costs


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   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

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