GoBank lends to companies by investing in unquoted bonds. GoBank holds these bonds in a portfolio that meets its objectives by collecting interest and realising capital gains. These bonds are therefore measured at fair value through other comprehensive income. The fair value of each unquoted bond is based on IFRS 13 level 2 inputs, which include the market interest rates of quoted bonds with similar maturities issued by companies in the same industry. The interest rates are used to discount each bond's future cash flows. Widening credit spreads have been noticed for the quoted bonds that are used as an input to the fair value model applied to GoBank's bond holdings. Sara would like advice on whether to adjust the method of fair valuation. 

What is your advice for her?

Answer rating: 100% (QA)

Based on the given information Sara is considering adjusting the method of fair valuation for GoBank... View the full answer