Under AASB 118 interest revenue is recognised as follows:

Question

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AASB 118 requires the use of the effective interest method for recognition of interest revenue, as it provides a more accurate reflection of the timing and amount of interest earned over the life of the financial asset. The use of the straight-line method would not provide as relevant and reliable information as it assumes a constant rate of return on the investment, which may not be the case in reality. As such, choice C is incorrect. Choice D is also incorrect, as revenue recognition should be based on the accrual accounting method rather than the cash receipts method.

Under AASB 118 Interest Revenue Is Recognised as Follows