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U.S. GAAP Codification Accounting Standards, ASC




U.S. GAAP
Financial Accounting Review


Principles of AccountingAccounting by Topic Accounting Terms Dictionary

Section 3120: Imputation of Interest

[U.S. GAAP Codification Topic]
835-30 Imputation of interest

[U.S. GAAP before the Codification]
APB Opinion 21, August 1971, Interest on Receivables and Payables

1. Imputation of interest
For notes exchanged for cash or other assets
(1) If face amount of the note > cash or fair value of the asset
--> the difference is discount
(2) If face amount of the note < cash or fair value of the asset
--> the difference is premium
(3) discount or premium is amortized using "interest method"

2. Note exchanged for cash
(1) Present value of the note = cash proceeds exchanged
(2) If present value of the note < face amount of the note
--> the difference is discount
--> discount is amortized using "interest method"
(3) Amortization of discount
--> interest expense for note payable
--> interest income for note receivable

3. Example 1: Note payable
Received $1,000 in cash and issued a $1,100 note payable
Present value = $1,000
Face amount = $1,100
Discount on note payable = $100
$100 is recognized as interest expense over the period

4. Example 2: Note receivable
Paid $1,800 in cash and received a $2,000 note receivable
Present value = $1,800
Face amount = $2,000
Discount on note receivable = $200
$200 is recognized as interest income over the period

5. Note exchanged for noncash assets
(1) Cost of the asset = (a) or (b) whichever is more clearly determinable
(a) fair value of the asset
(b) market value of the note
(2) If cost of the asset < face amount of the note
--> the difference is discount
--> discount is amortized using "interest method"
(3) Amortization of discount
--> interest expense for note payable
--> interest income for note receivable

6. Example 3: Note payable
Purchased a property with $3,000 fair value and issued a $3,300 note payable
Cost of the asset = $3,000
Face amount = $3,300
Discount on note payable = $300
$300 is recognized as interest expense over the period

7. Example 4: Note receivable
Sold a property with $4,000 fair value and received a $4,400 note receivable
Fair value of the asset = $4,000
Face amount = $4,400
Discount on note receivable = $400
$400 is recognized as interest income over the period

8. Balance Sheet Presentation
(1) Discount is deducted from the face amount of the note
--> Contra-asset account for note receivable
--> Contra-liability account for note payable
(2) Premium is added to the face amount of the note




Index of U.S. GAAP Financial Accounting Review


U.S. GAAP by Codification Topics 
 
 105  GAAP Hierarchy 
 105  GAAP History 

 205  Presentation of Financial Statements 
 205-20 Discontinued Operations 
 210  Balance Sheet 
 210-20 Offsetting 
 220  Comprehensive Income 
 225  Income Statement 
 225-20 Extraordinary and Unusual Items 
 230  Statement of Cash Flows 
 250  Accounting Changes and Error Corrections 
 260  Earnings per Share 
 270  Interim Reporting
 
 310  Impairment of a Loan
 320  Investment Securities 
 320  Other-Than-Temporary Impairments, FSP FAS 115-2 
 320-10-05 Overview of Investments in Other Entities 
 320-10-35 Reclassification of Investments in Securities
 323-10 Equity Method Investments
 323-30 Investments in Partnerships and Joint Ventures 
 325-20 Cost Method Investments 
 330  Inventory

 340-20 Capitalized Advertising Costs 
 350-20 Goodwill 
 350-30 Intangibles Other than Goodwill 
 350-40 Internal-Use Software 
 350-50 Website Development Costs 
 360  Property, Plant and Equipment
 360-20 Real Estate Sales


 410  Asset Retirement and Environmental Obligations 
 420  Exit or Disposal Cost Obligations 
 450  Contingencies 
 450-20 Loss Contingencies 
 450-30 Gain Contingencies
 480  Redeemable Financial Instruments 

 505-20 Stock Dividends, Stock Splits 
 505-30 Treasury Stock 

 605  SEC Staff Accounting Bulletin, Topic 13 
 605-25 Revenue Recognition - Multiple Element Arrangements 
 
 715-30 Defined Benefit Plans - Pension
 718  Share-Based Payment 
 730  Research and Development 
 730-20 Research and Development Arrangements 

 805  Business Combinations  
 810  Consolidation 
 810  Noncontrolling Interests 
 810  Consolidation of Variable Interest Entities, SFAS 167 
 
 815  Derivatives and Hedging Overview 

 820  Fair Value Measurements  
 820  Fair value when the markets are not active, FSP FAS 157-4
 825  Fair Value Option 

 830  Foreign Currency Matters 
 830-20 Foreign Currency Transactions 
 830-30 Translation of Financial Statements 
 835  Interest 
 835-20 Capitalization of Interest 
 835-30 Imputation of Interest 

 840  Leases 
 840-20 Operating Leases 
 840-30 Capital Leases 
 840-40 Sale-Leaseback Transactions
 845  Nonmonetary Transactions 

 855  Subsequent Events 
 860-20 Sale of Financial Assets, SFAS 166 
 860-50 Servicing Assets and Liabilities, SFAS 156 

 985-20 Costs of software to be sold  


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