CFM4106 - Accounting for loan relationships: lenders: accrual of balance sheet assets

Balance sheet: timing

The lender will record an asset in the balance sheet when it establishes ‘a right to future economic benefits as a result of past transactions or events’. So, where a company has entered into a loan arrangement and advanced the money, it will record a loan as its asset.

However, where the company merely gives a right to an agreed facility to draw down money, it will not record an asset until amounts are drawn down. Similarly, where a company enters into an agreement to receive a loan instrument in consideration of an event (e.g. sale of a business, or a funding transaction) but has not done so at the balance sheet date, it will not record a loan asset at that date.