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Interest rate

Financial Reporting

Sir, In every question there are two interest rates given It is bit confusing on which one to be used for discounting and which one to be used for calculating interest Can please clarify how to pick correct interest rate? Video Details ------------- Financial Instruments - FR Derivatives and Embedded Derivatives #6. Illustration 1

Gunda Sharan

CA Final

★ 0

03-Dec-24 06:22

246

Answers (2)

Rates used for discounting Market Rate/Yield: If given, this is often the rate used for discounting cash flows to their present value. Effective Interest Rate (EIR): If the scenario involves amortized cost or effective interest method under accounting standards like Ind AS 109, use EIR for discounting. Incremental Borrowing Rate (IBR): For leases (Ind AS 116), the IBR is often the discounting rate.

CA Suraj Lakhotia

Admin

03-Dec-24 13:40

For payment - table preparation look for coupon rate, nominal rate of x% bonds.

CA Suraj Lakhotia

Admin

03-Dec-24 13:48

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