Coundon Ltd , a key supplier of the Eldon plc group, experienced cash flow difficulties during 2
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Coundon Ltd a key supplier of the Eldon plc group, experienced cash flow difficulties during On October Eldon plc provided a fiveyear million loan to Coundon Ltd at an effective rate of interest of per annum to protect its supply chain. The loan was repayable in five equal annual instalments in arrears, starting on September Eldon plcs business model was to collect all of the underlying cash flows of interest and principal. On October the present value of expected credit losses over the duration of the loan based on a discount factor was Eldon plc estimated the probability of default in the next months was During Coundon Ltds financial difficulties worsened, and the company was unable to pay its first loan instalment due on September Eldon plcs directors believe that the default represents objective evidence of impairment. The present value of the lifetime credit losses was revised to million on September
Required
Advise the directors of Eldon plc on the accounting treatment of loan receivable for the year ended September
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