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Chapter 13: 4IFRS (page 658)

Which types of investments are valued at amortized cost? Explain the rationale for this accounting.

Short Answer

Expert verified

Held-for-maturity investments are valued as amortised costs.

Step by step solution

01

Definition of amortised cost

Amortised cost is known as the accumulated portion of the cost of a fixed asset. The amortised cost is charged against the asset as an expense.

02

Investment valued at amortised cost

Held-for-maturity is a type of investment valued at an amortised cost because this type of investment is held for more than one and does not report at fair value in the balance sheet. Hence. These securities are valued at amortised cost.

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Most popular questions from this chapter

Question: The presentation of current and non-current liabilities in the statement of financial position (balance sheet):

  1. is shown only on GAAP financial statements.
  2. is shown on both a GAAP and an IFRS statement of financial position.
  3. is always shown with current liabilities reported first in an IFRS statement of financial position.

(d)includes contingent liabilities under IFRS.

Question: In determining the amount of a provision, a company using IFRS should generally measure:

(a) Using the midpoint of the range between the lowest possible loss and the highest possible loss.

(b) Using the minimum amount of the loss in the range.

(c) Using the best estimate of the amount of the loss expected to occur.

(d) Using the maximum amount of the loss in the range.

(Fair Value Measurement) Presented below is information related to the purchases of common stock by Lilly

Company during 2017.

Cost Fair Value

(at purchase date) (at December 31)

Investment in Arroyo Company stock \(100,000 \) 80,000

Investment in Lee Corporation stock 250,000 300,000

Investment in Woods Inc. stock 180,000 190,000

Total \(530,000 \)570,000

Instructions

(Assume a zero balance for any Fair Value Adjustment account.)

(a) What entry would Lilly make at December 31, 2017, to record the investment in Arroyo Company stock if it chooses to

report this security using the fair value option?

(b) What entry(ies) would Lilly make at December 31, 2017, to record the investments in the Lee and Woods corporations,

assuming that Lilly did not select the fair value option for these investments?

How does unearned revenue arise? Why can it be classified properly as a current liability? Give several examples of business activities that result in unearned revenues.

Under what conditions is an employer required to accrue a lability for sick pay? Under what conditions is an employer permitted but not required to accrue a liability for sick pay?
See all solutions

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