Under International Financial Reporting Standards, investments in debt instruments are reported at either amortized cost or fair
Question:
Under International Financial Reporting Standards, investments in debt instruments are reported at either amortized cost or fair value through profit or loss. The president of Lunn Financial Enterprises does not understand why there are two methods and wonders why all debt investments are not reported at amortized cost.
Instructions
Write a memo to the president of Lunn Financial Enterprises, explaining when it is appropriate to report debt investments at amortized cost and when it is appropriate to report debt investments at fair value through profit or loss. Discuss in your memo why reporting different debt investments using different methods gives better information for investors and creditors to evaluate the performance of the company’s investment portfolio.
Step by Step Answer:
Accounting Principles Volume 2
ISBN: 9781119786634
9th Canadian Edition
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak