Tamarack repays 100 of principal on its term loan and pays 80 of interest. On the course’s default placement, the two amounts appear as:

Answer

Principal 100 in financing; interest 80 in operating

Options - A. Principal 100 in financing; interest 80 in operating - B. Both in operating, since both relate to the loan - C. Both in financing, since both are paid to the lender - D. Principal 100 in investing; interest 80 in financing Why - A. Correct — repaying capital to a provider of capital is financing; interest is a cost of running the business and sits in operating by default (IFRS would also allow it in financing, lesson 10.3). - B. Principal repayment is never operating; it returns capital to a lender. - C. The course’s default and ASPE’s rule put interest paid in operating; placing it in financing is an IFRS option, not the default. - D. Investing is for long-lived assets and investments, not for the company’s own borrowing.

Lyryx IFA Vol 2 §20.2–20.2.1; Heisinger & Hoyle §12.2; Lyryx Intro FA §11.3