Under International Financial Reporting Standards, investments in debt instruments are reported at either amortized cost or fair value. 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. 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.