Rocky Mountain Corp. currently has an issued debenture outstanding with Abbra Bank. The note has a principal of $2 million, was issued at face value, and interest is payable at 7%. The term of the debenture was 10 years, and it was issued on December 31, 2016. The current market rate for this debenture is 9%. Rocky Mountain has been experiencing financial difficulties and has asked Abbra Bank to restructure the note. Both Rocky Mountain and Abbra Bank prepare financial statements in accordance with IFRS. It is currently December 31, 2023.

Abbra Bank agrees to reduce the principal to $1.6 million and require interest only in the third year at 4%, waiving the first two years worth of interest. (Hint: Refer to Chapter 3 for tips on calculating and use the time value of money tables.) Assume that the bank had not previously recognized any loss on impairment.