LC
From what I understand LRC excluding LC + LC = FCF. Under the GMM, lets say the FCF= 100(net outflow), how do we establish the LC or do we have enough information to establish it?
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From what I understand LRC excluding LC + LC = FCF. Under the GMM, lets say the FCF= 100(net outflow), how do we establish the LC or do we have enough information to establish it?
Comments
If you are measuring under GMM then it would just be whatever it takes to net your FCF to 0 at time 0
1.So based on your response, under GMM the LC would be equal to the FCF and the LRC excl LC would be 0? 2.Also, let me know if you agree with my following statement: Under GMM: at initial recognition if a contract is onerous (FCF is a net outflow) then the LRC ex LC will always be 0 & LC is booked and if a contract is non-onerous, then the LRC will be zero since a CSM is established and there is no journal entry.
Just a follow-up about this.. 'It is not true that LRC will be zero when you have a CSM' :are you also talking about initial recognition ? I though that initial recoginition when FCF is a net inflow we set the CSM=-FCF and thus LRC=FCF+CSM=0?
Oops typo there I mean It is not true that the LRC will be zero when you have a LC
Just closing the loop on this.. For onerous contracts, LRC ex LC is always 0 under GMA. For non-onerous contracts LRC is always 0 since LRC= FCF + CSM. Do you agree with this statement?
As I mentioned above, under GMA there is no need to calculate the LRC excl LC.
LRC is only 0 when a contract is onerous at initial recognition