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Discuss the accounting treatment

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Reference no: EM132919239

Question - Question 3Happy Sdn Bhd purchased a debt instrument on 1 January 2019 at its fair value of RM5 million. The face value of the instrument was RM12 million with an interest rate of 2.35%. The instrument will mature in three years' time with a redemption value of RM6.25 million. The market interest rate was 10%. Transaction cost amounted to RM400,000. The directors wish to measure this transaction at amortised cost using the effective interest rate method as it intends to hold the financial instrument to maturity.

Required - Discuss the accounting treatment in accordance with the relevant financial reporting standards and where necessary, show how it should be disclosed in the financial statements of Happy Sdn Bhd for the year ended 31 December 2019.

Reference no: EM132919239

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