Just looking at this question and the treatment of interest on the loan has got me confused...
The difference in the market value for the loan amount over the year is -£10m, which to me means the company has paid off or renegotiated the loan amount/interest due so it is less than it was - so there's a reduction of £10m in the non-technical account in the answer.
Seems sensible.
However I have in my notes that this row should be [- interest on loans] which I'd taken to be a double negative so had added the above £10m amount.
So does this mean the 'interest on loans' line is the opposite in sign to 'gains on loan relationships' used in the answer?
In trying to understand the answer, I was then thinking if a company had not made a dent into their interest over the course of a year, so in fact the MV of their loan relationships had increased over the year - is that correct that this amount would then be treated as a gain and taxed, even though it is now a larger cost to the company?
...help...!
The difference in the market value for the loan amount over the year is -£10m, which to me means the company has paid off or renegotiated the loan amount/interest due so it is less than it was - so there's a reduction of £10m in the non-technical account in the answer.
Seems sensible.
However I have in my notes that this row should be [- interest on loans] which I'd taken to be a double negative so had added the above £10m amount.
So does this mean the 'interest on loans' line is the opposite in sign to 'gains on loan relationships' used in the answer?
In trying to understand the answer, I was then thinking if a company had not made a dent into their interest over the course of a year, so in fact the MV of their loan relationships had increased over the year - is that correct that this amount would then be treated as a gain and taxed, even though it is now a larger cost to the company?
...help...!
