Presented below are two independent cases related to
available-for-sale debt investments.
Case 1 | Case 2 | |||
Amortized cost | $40,200 | $93,300 | ||
Fair value | 30,990 | 104,120 | ||
Expected credit losses | 26,420 | 85,640 |
For each case, determine the amount of impairment loss, if any.
(If no loss, please enter 0. Do not leave any fields
blank.)
Case 1 | ||
Impairment Loss | $
|
Case 2 | ||
Impairment Loss | $
|
Answer
Case 1: |
Impairment loss occurs only when the fair value < Cost of an asset. |
Since the fair value of the asset is less, impairment loss exists. |
Impairment loss = Amortized cost - Higher of (Face value and Expected losses) |
= $40,200 - $30990 |
= $9,210 |
Case 2: |
Impairment loss = Amortized cost - Fair value |
= $93,300-104,120 |
= $0 |
Since the fair value > Cost, there is no impairment loss in this scenario |
Presented below are two independent cases related to available-for-sale debt investments. Case 1 Case 2 Amortized...
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Cumulative Change in Fair Value
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63,200
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