NOTES PAYABLE CASH PRICE EQUIVALENT

 Obligations supported by debtor  Tha fair value of a payable may

promissory notes.
INITIAL MEASUREMENTS
 Initially recognized at fair value
minus transaction costs.
INITIAL MEASUREMENT
Notes Payable are classified into the
following:
A. Short- term payable
B. Long-term payable that bears a
reasonable interest rate
C. Long-term payable that bears no
interest (noninterest bearing)
D. Long-term payable that bears an
unreasonable interest rate (‘below-
market’ interest rate)
Short-term payable is one that
matures within 1 year.
Long-term payable is one that
matures beyond one year
be measured in relation to the
cash price equivalent.
 If the cash price equivalent of
the noncash consideration
received in exchange for the
note is available, the notes
payable is initially measured at
this amount.
SUBSEQUENT MEASUREMENT
 Notes are initially measured at
face amount are subsequently
measured at face amount or
expected settlement amount.
 Notes payable that are initially
measured at present value are
subsequently measured at
amortized cost. The amortized
cost is determined using the
effective interest method.

Short-term Notes (1 year or less)

 Short-term notes payable are
initially measured at face amount
or present value.
 The fair value of short-term
payable may be equal to its face
amount.
 However, if the arrangement
effectively constitues a financing
transaction and the imputed can
be determined without undue
cost or effort, the fair value of the
short term payable is equal to
oits present value.

Long-term Notes
 Long-term notes that bear a
reasonable interest rate (interest
bearing notes) are initially
recognized at face amount
 Long-term non interest bearing
notes and long-term with
unreasonable interest rate are
initially measured at present
value.