Coundon Ltd$,$ a key supplier of the Eldon plc group, experienced cash flow difficulties during $2022.$ On $1$ October $2022,$ Eldon plc provided a five$-$year $10$ million loan to Coundon Ltd at an effective rate of interest of $5\%$ per annum to protect its supply chain. The loan was repayable in five equal annual instalments in arrears, starting on $30$ September $2023.$ Eldon plc$$s business model was to collect all of the underlying cash flows of interest and principal. On $1$ October $2022,$ the present value of expected credit losses over the duration of the loan $($based on a $4\%$ discount factor$)$ was $500,000.$ Eldon plc estimated the probability of default in the next $12$ months was $20\%.$ During $2023,$ Coundon Ltd$$s financial difficulties worsened, and the company was unable to pay its first loan instalment due on $30$ September $2023.$ Eldon plc$$s directors believe that the default represents objective evidence of impairment. The present value of the lifetime credit losses was revised to $5$ million on $30$ September $2023.$

Required

Advise the directors of Eldon plc on the accounting treatment of loan receivable for the year ended $30$ September $2023.$

Answer rating: 100% (QA)

Answer Based on the scenario described here is the accounting treatment for the loan receivable for Eldon plc for the year ended 30 September 2023 1 R... View the full answer