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Chapter 13: 4ISTQ (page 658)

Select the investment accounting approach with the correct valuation approach: Not Held-for-Collection Held-for-Collection (a) Amortized cost Amortized cost (b) Fair value Fair value (c) Fair value Amortized cost (d) Amortized cost Fair value

Short Answer

Expert verified

Correct option is Option (c).

Step by step solution

01

Definition of IFRS

International financial reporting standard (IFRS) is the group of rules and regulations that regulate and define how the transaction is reported in the company's financial statements.

02

An explanation for the correct option

In the case of the debt investment under the IFRS, investments that meet the business model and cash flow test are considered the investment held for collection. This investment is valued at an amortized cost. While the debt investment, which does not meet the cash flow test, is then considered not held for maturity and valued at fair value.

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Most popular questions from this chapter

Under what conditions is an employer required to accrue a lability for sick pay? Under what conditions is an employer permitted but not required to accrue a liability for sick pay?

On December 21, 2017, Zurich Company provided you with the following information regarding its trading investments.

December 31, 2017

Investments (Trading) Cost Fair Value Unrealized Gain (Loss)

Stargate Corp. shares \(20,000 \)19,000 \((1,000)

Carolina Co. shares 10,000 9,000 1000

Vectorman Co. shares 20,000 20,600 600

Total of portfolio \)50,000 \(48,600 \)(1,400)

Previous fair value adjustment balance-0-

Fair value adjustment-Cr. \((1,400)

During 2018, Carolina Co. shares were sold for \)9,500. The fair value of the shares on December 31, 2018, was Stargate Corp.

shares-\(19,300: Vectorman Co. shares-\)20,500

Instructions

(a) Prepare the adjusting journal entry needed on December 31, 2017.

(b) Prepare the journal entry to record the sale of the Carolina Co. shares during 2018.

(c) Prepare the adjusting journal entry needed on December 31, 2018.

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