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FRS 102 - Accrued coupon interest on Bond

  • 15-02-2017 10:06pm
    #1
    HcksawJimDuggan
    Registered Users, Registered Users 2 Posts: 394 ✭✭


    A company purchases a bond for €105 in June 2016. The bond has a par value of €100 and pays a coupon of €10 every September. At the time the bond was purchased (June 2016) the coupon interest accrued was €7.50.

    Under FRS 102, is the correct treatment to:
    1 - Book the cost of €105 to Investments & release the premium paid of €5 over the remaining Life of the bond using the effective interest rate

    Or

    2. Book the cost as €97.50 & €7.50 as a debit against coupon income (to reflect the interest accrued at the date of purchase)


Comments

  • #2
    occean
    Registered Users, Registered Users 2 Posts: 1 ✭occean


    A portion of the 105 goes towards paying for the accrued interest receivable of 7.50.

    So, the FV of the bond investment is 97.50 which needs to be accreted until maturity date with the difference between EIR and coupon rate.


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