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Interest adjustment under the effective interest method Excel solutions

Author: ZhangDunLi¡¡LiYinXiang From: www.yourpaper.net Posted: 2009-05-03 08:07:59 Read:
[Abstract] In this paper, bonds payable and held-to-maturity debt securities, for example, with Excel software, in-depth to explore the determination of the effective interest rate under the effective interest method and interest adjustment problems solution.
2007 start of the "Accounting Standards for Business Enterprises No. 22 - Financial Instruments Recognition and Measurement Guide (hereinafter referred to as the" new standard "), the measurement of financial assets or financial liabilities using the effective interest method (including a group of financial assets or financial liabilities at amortized cost, the following abbreviated), the interest income or interest expense. Its core is the determination of the effective interest rate and the interest adjustment be amortized in subsequent periods.

First, the basic principle of the effective interest rate method

According to the new standards, and the use of bonds payable and accounting for the principal and interest of the bonds issued to raise long-term funds. If the long-term bond maturity, a fixed amount of debt service (such as regular interest payment at maturity the principal, or maturity date, etc.), and the purchase of undertakings acquired has the positive intention and ability to hold to maturity, the formation of the acquired companies held-to-maturity debt securities, held-to-maturity investments - bonds accounting courses. "Bonds payable" and "held-to-maturity investments" are designed to account for bond issuers and investors subject to specific bond trading business, they are a pair of borrowing in the opposite direction, the amount related to the symmetry of the subjects, the symmetry The main features are: (1) Bonds payable "and" nominal value "(Credit) is equal to" held-to-maturity investments "" cost "(debit); (2) Bonds payable are initially recognized amount and the nominal value of included in the "interest adjustment" debit or credit, in a subsequent period, the effective interest rate method amortization, according to the accounting of interest expense related subjects to adjust the corresponding period of the "Finance costs" or "under construction" (hereinafter only "financial costs ", for example) and the book value of the bonds payable"; "held-to-maturity investments" credit or debit of the amount initially recognized and included in the nominal value of the interest adjustment in a subsequent period, the effective interest rate method amortization According to adjust the corresponding period of the investment income (interest income) and "held-to-maturity investments" book value; (3) Total amortization amount for each issue of the follow-up period is equal to the initial recognition of the "interest adjustment" interest adjustment amount; (4) Bonds payable in the interest adjustment initially recognized amount and the follow-up period of each amortized amount may be equal to "held-to-maturity investments" and the amount initially recognized and the follow-up period amortization of each amount (credit or debit); (5) the issuance of corporate finance costs (interest expense) acquired companies' investment income (interest income).
Bond issuer (or investors) using the effective interest rate method to determine the bonds payable (or held-to-maturity debt securities) of interest expense (interest income) and the amortized cost of the basic procedure is as follows: (1) to determine the interest adjustment "initial recognition amount; (2) determination of the effective interest rate; (3) the period should be assessed interest expense (interest income); (4) for the period (should) pay (or income) interest payments; ( 5) Calculate the amortization for the period of the "interest adjustment" (or adjustment, the same below) the amount; (6) the end of the period at amortized cost; "held-to-maturity investments (7) the present value of the expected future cash flows; (8) Provision for or reversal of provision for impairment of held-to-maturity investments "; (9) the carrying amount at the end of the period. In the case of the interest adjustment initially recognized amount known, the effective interest rate directly determines the amount of (3) - (9).

Two
solution to the basic principles of the effective interest rate, using Excel software.

The effective interest rate is the future cash flows, discounted at the financial assets or financial liabilities are expected during the existence or applicable shorter period for the current book value of the financial assets or financial liabilities (the amount initially recognized) interest rate used. The enterprise shall, in recognition of a financial asset or financial liability to determine the actual interest rate and expected term or applicable shorter period remains unchanged.
In the manual system, the effective interest rate is usually on a step-by-step test basis interpolation (a trial and error method) to determine the frequency of testing is generally more than twice, and the results may also be due to selection on the basis of different interest rates and different ( as shown in Example 1).
Example 1: A company in early 2001 the price of 10.59 million yuan a par value of 10 million yuan, a coupon rate of 6.5%, the end of each year, and interest is paid annually, the five-year maturity bonds repayable at par. A corporate commitments related transaction costs of $ 100,000. Assume that the effective interest rate of the IRR, type 1 was established:
If you are used to test the base rate is the right-hand side of IRR0 = 6.5% (= 1000)
The resolvent any two formulas linked into the equation, IRR = 5.37%.
When used to test the basis of interest rates is the right IRR0 = 6% (1 = 1021.06)
And IRR1 = 5% (the right side of the formula 1 = 1064.94), as determined according to the interpolation method IRR 5.36%, which compared the results with Formula 2, although only 0.01% of the error, but the follow-up period to determine over a period I costs and interest charges will appear larger error.
By Excel software built-in functions IRR solving real interest rates, not only the process is very convenient, but also to avoid for testing different base rate differences. IRR function returns the parameter values ??represented by a set of cash flow internal rate of return (ie the effective interest rate), the syntax of the function is IRR (values, guess). (1) Parameter Values ??represent periodic payment (negative) and regular income (positive) cash flow, it must contain at least one positive and one negative. Function in accordance with the order of the parameter values ??to interpret the order of cash flows, the order in which the cash flow to an array or a cell reference in the form of input values, and the first cash flow occurs at the 0 (decision points), t and t 1, the interval must be a fixed unit of time (such as years or months), and later on. If the cash flow in period t is 0, 0, may be omitted. If an array or reference contains text, logical values, or empty cells, those values ??are ignored. (2) parameter "guess" for the estimated value of the result of IRR (in most cases, does not require the calculation of the IRR function provide guess), it requires Excel software Starting with guess (if omitted, Ascending loop calculation using the iterative method IRR, 10%) until the result is accurate within 0.00001%. If IRR after 20 iterations, not find a result, it returns the error value # NUM! " If the IRR function returns the error value # NUM! "Or close to the expected value available another guess try again.
Analysis of Example 1 in cash flows related to bonds shows that a corporate issue a one-time net cash inflow (ie the transaction price, net of transaction costs balance = 1059-10 = 1049 million, expressed as a positive number), the follow-up period the principal interest occurs when multiple net cash outflow (negative), cash flows related to the bonds is a positive and more negative conventional cash flows (shown in Figure 1 of C9: H10 shown), to meet the IRR function parameters values ??the required conditions, it can be solved by the IRR function effective interest rate, follow these steps:
(1) cash flow occurred at a time (such as 0, 1, 2, 3, 4, 5, it can be a specific date) input C9: H9.
The cash flow at each time point input C10: H10. Should be noted that the corresponding cash flow amount and the point in time (such as C10 and C9 correspondence), and the flow of positive and negative numbers to distinguish.
C11 input = IRR (C10: H10), press the Enter key after the effective interest rate of 5.36%.

Third, the calculation of the value of the interest adjustment in the Excel environment sharing and amortized

Enterprises in the issue of the bonds payable (or obtain "held-to-maturity investments") to determine the initially recognized amount and the effective interest rate of the bond payable "(or" held-to-maturity investments ")," interest adjustment " expected during the existence of each end of the period or applicable shorter period shall be calculated in accordance with the effective interest rate and the beginning of the book value of the current period should be assessed interest charges (or interest income), the share of interest expense (or realized interest income) and (should) pay (or income) is determined as the difference between the interest payments the interest adjustment period assessed, Opening net book value plus (or minus) the current share of the interest adjustment " and (or difference) is the "Bonds payable (or obtain the amortized value of held-to-maturity investments"). The amortized value of bonds payable is equal to its book value; "held-to-maturity investments carried at amortized value less provision during the period for impairment (or plus the current reversal of provision for impairment) amount is the ending book value. The relationships between them are described below: 1. Initially recognized amount (ie, the first beginning of the book value)
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