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Chapter 13: Q5ISTQ (page 658)

Under IFRS, a company:

(a) should evaluate only equity investments for impairment.

(b) accounts for impairment as an unrealized loss, and includes it as a part of other comprehensive income and as a component of other accumulated comprehensive income until realized.

(c) calculates the impairment loss on debt investments as the difference between the carrying amount plus accrued interest and the expected future cash flows discounted at the investment鈥檚 historical effective interest rate.

(d) All of the above.

Short Answer

Expert verified

Option (c) is correct

Step by step solution

01

Definition of Unrealised Loss

An unrealized loss is a loss that arises due to the decrease in the asset's value without selling it.

02

Under IFRS

Under the rules of the IFRS, a company has to calculate the impairment loss by the difference between the carrying amount, and their future cash flow must be discounted at the historical effective interest rate.

Hence option (c) is correct.

Option (a) is incorrect because this is not the guideline of IFRS.

Option (b) is wrong because this is not the guideline of IFRS.

Option(d) is wrong because not all choiceis correct.

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