On December 31, 2018, Blackpink Company, a financing institution lent ₱15,000,000 to YG Corp. due 3 years after. The loan is supported by an 12% note receivable. Based on the company’s initial estimates the present value of the 12 months expected credit loss (ECL) discounted at 10% is at 2,000,000. The probability of default (PD) is at 7%. Blackpink Company was able to collect interest as it became due at the end of 2019. There was no evidence of significant increase in credit risk by the end 2019 and that the receivable is determined to have “low credit risk”. There were no changes in its initial estimate of the 12 months expected credit loss either. By the end of 2020, Blackpink Company was able to collect interest as it became due. Based on available forward-looking information (determinable without undue cost or effort), however, there is evidence that there was a significant increase in credit risk by the end of 2020. Blackpink Company therefore had to change its basis of calculation of the loss allowance from 12 months ECL to lifetime expected credit loss. The present value of the lifetime expected credit loss discounted at 10% is at 5,000,000. The probability of default (PD) is at 22%. During 2021, however, due to YG Corp.’s business deterioration and significant financial difficulties, the company was not able to collect amounts due at the end 2021. After reviewing all available evidence at December 31, 2021, Blackpink Company determined that the receivable is credit impaired and that impairment loss should be recognized. Blackpink Company also entered into the following concessions with YG Corp.: Interest due in 2021 is waived. Only 10M of the principal shall be collected in 2 equal installments, at the end of 2022 and 2023. Annual interest on the 10M revised principal shall be collected at 14% at the end of each year for the next two years (based on outstanding balance). As of December 31, 2021, the prevailing rate of interest for all debt instruments is 15%. What is the Initial Carrying Value of the Loans receivable as of December 31,2918 What is the net amount to be recognized in the profit or loss for 2019 in relation to the loan What is the carrying value of the loans receivable as of December 31,2020 What is the carrying value of the loans receivable as of December. 31, 2021, after impairment of recognition
On December 31, 2018, Blackpink Company, a financing institution lent ₱15,000,000 to YG Corp. due 3 years after. The loan is supported by an 12% note receivable. Based on the company’s initial estimates the present value of the 12 months expected credit loss (ECL) discounted at 10% is at 2,000,000. The probability of default (PD) is at 7%.
Blackpink Company was able to collect interest as it became due at the end of 2019. There was no evidence of significant increase in credit risk by the end 2019 and that the receivable is determined to have “low credit risk”. There were no changes in its initial estimate of the 12 months expected credit loss either.
By the end of 2020, Blackpink Company was able to collect interest as it became due. Based on available forward-looking information (determinable without undue cost or effort), however, there is evidence that there was a significant increase in credit risk by the end of 2020. Blackpink Company therefore had to change its basis of calculation of the loss allowance from 12 months ECL to lifetime expected credit loss. The present value of the lifetime expected credit loss discounted at 10% is at 5,000,000. The probability of default (PD) is at 22%.
During 2021, however, due to YG Corp.’s business deterioration and significant financial difficulties, the company was not able to collect amounts due at the end 2021. After reviewing all available evidence at December 31, 2021, Blackpink Company determined that the receivable is credit impaired and that impairment loss should be recognized. Blackpink Company also entered into the following concessions with YG Corp.:
Interest due in 2021 is waived.
Only 10M of the principal shall be collected in 2 equal installments, at the end of 2022 and 2023.
Annual interest on the 10M revised principal shall be collected at 14% at the end of each year for the next two years (based on outstanding balance).
As of December 31, 2021, the prevailing rate of interest for all debt instruments is 15%.
What is the Initial Carrying Value of the Loans receivable as of December 31,2918
What is the net amount to be recognized in the profit or loss for 2019 in relation to the loan
What is the carrying value of the loans receivable as of December 31,2020
What is the carrying value of the loans receivable as of December. 31, 2021, after impairment of recognition
Step by step
Solved in 2 steps
