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    MOTC INTERNAL AUDIT SECTION
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    FAR 21-01

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    41 views11 pages

    Far 21-01

    Uploaded by

    MOTC INTERNAL AUDIT SECTION

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    © All Rights Reserved
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    of 11
    Page 1 of 4| FAR Handouts No.21 REAL NOTES PAYABLE EXCELLENCE rasa OABAGO oR NOTES PAYABLE KARIM G. ABITAGO, CPA NOTES PAYABLE : ; Notes payable are liabilities evidenced by a written document known as “promissory note”. A promissory note is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer. CLASSIFICATION & MEASUREMENT ¥ ia Fees [Fa vas rs pense CLASSIFICATION [ac tna | enn el | rarest ta nn Franca ves okose ‘farvibe, | Fa Vate Fai Vato ne | reset | ‘pot le finan — | muir Frere) CiStmes oe ean iabines a | Fat Valve minus | rorzna Cost Yes no | etecve ate Amortized Cost | Tansa For notes payable at amortized cost, the word “fair value", for initial measurement purposes, depends on Ws further Sub Classification and summarized as follows: INITIAL MEASUREMENT interest Beating | << Face Value Face Value, unless SHORT TERM Non-interest | ———> giscounting is material is Bearing should be measured at Present Value With reasonable interest rate > Face Value With unreasonable Present Value |__interestrate Pere esto |e Present Value Bearing _ FREQUENTLY ASKED QUESTIONS (1) The intial and subsequent measurement of notes payable (please refer to the discussion above) (2) For financial assets at amortized cost, the subsequent measurement can be determined through the use of ‘amortization table (3) _ Interest expense for the year + For FVPL liabilities — interest expense is based on NOMINAL RATE +, __ For FAC liabilities ~ interest expense is based on EFFECTIVE RATE (4) Current and non-current portion of notes payable Teor nor fle generally applies only for long-term notes payable with series of payments of principal For ong- ieim notes payable with lump-sum payment of principal, the WHOLE carrying amount is classified ac curse Vabilty if itis due currently (LONG-TERM DEBT CURRENTLY MATURING) * For notes payable measured at face value ~ the payment within 12 months is classified as the current portion, * For notes payable measured at present value — the payment within 12 months less effective interest is classified as the current portion DEBT RESTRUCTURING sieuteeucturing is a situation where the creditor, for economic or legal reasons related to the debtors fancial

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