Question 4 Answer all parts of this question Primus plc borrowed 2 million from a bank on 1 January 2013. The loan has the following terms Maturity of 4 years .Primus plc must repay 1 million on 31 December 2014. The remaining amount (E1 million) is repaid at maturity Interest rate of 6% charged during 2013 and 2014; Interest rate dropping to 4% from 1 January 2015, until the end of the borrowing period Interest is paid at the end of each year The effective interest rate on the loan is 5.69% The fair value of the loan at the end of each of the following financial years was 2.05 million at the end of 2013, 2.22 million at the end of 2014 and 2.10 million at the end of 2015 Primus plc's financial year ends on 31 December Required a) Using amortised cost accounting, compute the liability recognised on Primus plc's statement of financial position at the end of the 2014 and 2015 financial years, showing all workings 7 marks b) Briefly explain under what circumstances, according to IFRS, a loan 3 marks liability can or should be accounted at amortised cost. c) Using fair value through profit and loss accounting, compute the amounts to be recognised on Primus plc's statement of financial position and statement of comprehensive income, in relation to the loan, for the 2014 and 2015 financial years, showing all workings. 7 marks d) Briefly explain under what circumstances, according to IFRS, a loan 3 marks liability can or should be accounted at fair value through profit and loss. e) If you were Primus plc's finance director, would you prefer to account for the loan using amortised cost accounting or fair value through profit and loss accounting? Explain 5 marks Total 25 marks) Page 7 of8