For each of the following situations, use the IFRS revenue recognition criteria to determine when the interest revenue should be recognized. Explain your reasoning.
a. A lender makes a loan to a borrower with an excellent credit rating. Interest is paid annually and the principal must be paid in full in three years.
b. A lender makes a loan to a borrower. The borrower is now suffering serious financial problems and hasn't made interest payments for several months. Collection of interest and principal from this borrower is in doubt.
c. A lender makes a five-year loan to a borrower. The borrower has a solid credit history and needed the loan to help finance expansion. The expansion hasn't gone according to plan and the company has been short of cash. The borrower has made all required payments to date but usually late, often for as long as 90 days. The borrower has stated that it expects to make all payments on a timely basis but cash flow information suggests the cash crisis is deepening and isn't likely to improve for the foreseeable future.

  • CreatedFebruary 26, 2015
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