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13.6 Luxembourg Loan Accounting and Interest Expense

Loan Accounting​

Loan Receipt:

  • Record loan as liability
  • Record cash received
  • Set up amortization schedule

Interest Accrual:

  • Accrue interest over time
  • Use effective-interest method
  • Record interest expense

Loan Payment:

  • Record principal and interest
  • Reduce loan balance
  • Record interest expense

Luxembourg Considerations​

Tax Treatment:

  • Interest expense is tax-deductible
  • Must be properly documented
  • Affects taxable income

Documentation:

  • Loan agreements
  • Amortization schedules
  • Payment records
  • Interest calculations

Luxembourg Compliance Note​

Loan accounting in Luxembourg:

  • Must use proper PCN accounts
  • Must accrue interest properly
  • Must maintain documentation
  • Interest expense affects taxes
  • Must comply with regulations

Think It Through​

Why is proper loan accounting important for both financial reporting and tax compliance?