A bank granted a 10-year loan to a borrower in the amount of P1,500,000 with stated

interest rate of 6%. Payments are due monthly and are computed to be P16,650. The
bank incurred P40,000 of direct loan origination cost and P20,000 of indirect loan
origination cost. In addition, the bank charged the borrower a 4-point nonrefundable
loan origination fee. What is the carrying amount of the loan receivable to be reported
initially by the bank?

a. 1,440,000
b. 1,480,000
c. 1,500,000
d. 1,520,000

ANSWER : B

Face amount 1,500,000

Direct origination cost 40,000
Origination fee charged against borrower (4% x 1,500,000) (60,000)
Initial carrying amount 1,480,000

The direct origination cost is a deferred charge and the origination fee received from the
borrower is unearned income and the two should be included in the measurement of
loan receivable.

The indirect origination cost is an outright expense.

IA 1 – QUESTION 2

Which statement is incorrect regarding the timing of application of PFRSs?

a. PFRSs apply from a date specified in the document.
b. New or revised PFRSs set out transitional provisions to be applied on their initial
application.
c. Until the effective date of a PFRS, the requirements of any PFRS that would be
affected by proposals in an exposure draft remain in force.
d. The FRSC has a general policy of exempting transactions occurring before a
specific date from the requirements of new PFRSs.