What is the appropriate accounting treatment for a loan that is the subject of a swap agreement?
A) Since the loan has been swapped with another, the two loans should be set-off in accordance with AASB 132.
B) The original loan should be removed from the statement of financial position and replaced by the other loan in the swap.
C) The original loan should be removed from the statement of financial position and replaced by the other loan in the swap. In the case of a foreign currency swap this treatment is also appropriate but the gain or loss on foreign currency translation should be deferred and amortised over the life of the loan.
D) The original loan, for which the entity has the primary obligation, should be retained in the statement of financial position.

Question

Quizplus · Accepted Answer

The correct treatment for a loan subject to a swap agreement is to retain the original loan on the statement of financial position. Swap agreements do not replace the original loan with the new one; instead, they are derivative contracts that are recognized separately. The entity remains primarily obligated under the terms of the original loan, which is why it stays on the statement of financial position.

What Is the Appropriate Accounting Treatment for a Loan That