CFM4108 - Accounting for loan relationships: lenders: accrual of discounted loans

Balance sheet: debt issue

If a company issues a loan to be redeemed for a greater amount, it will initially record the loan at issue cost, and spread the difference (the discount) over the period to redemption. The value of the asset (the carrying value) increases each period. This is not a revaluation to go through a revaluation reserve, but a realised profit within the profit and loss account.

You can see the full accounting treatment of discounted securities at CFM4124.