Question
Happy Sdn Bhd purchased a debt instrument on 1 January 2019 at its fair value of $5 million. The face value of the instrument was
Happy Sdn Bhd purchased a debt instrument on 1 January 2019 at its fair value of $5 million. The face value of the instrument was $12 million with an interest rate of 2.35%. The instrument will mature in 3 years time with a redemption value of $6.25 million. The market interest rate was 10%. Transaction cost amounted to $400,000. The directors wish to measure this transaction at amortized cost using the effective interest rate method as it intends to hold the financial instrument to maturity.
Required:
Discuss the accounting treatment in accordance with the relevant financial reporting standards and where necessary, show how it should be disclosed in the financial statements of Happy Sdn Bhd for the year ended 31 December 2019
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