If the fair value of a debt investment that is classified as an available-for-sale investment declines for a reason that is viewed as "other than temporary" because it is viewed as "more likely than not" that the investor will be required to sell the investment prior to recovering the amortized cost of the investment less any credit losses arising in the current year:
A) The investment is not written down to fair value.
B) The investment is written down to fair value, and the impairment loss is recognized in net income.
C) The investment is written down to fair value, and the impairment loss is recognized in accumulated other comprehensive income.
D) The investment is written down to fair value, and only the noncredit loss is included in net income.

Question

Quizplus · Accepted Answer

When the fair value of a debt investment that is available-for-sale declines, and it is considered "other than temporary," the investment is written down to fair value, and the impairment loss is recognized in net income. This means that the loss is recorded as an expense on the income statement and will reduce the net income. The impairment loss is taken as the difference between the amortized cost of the investment less any credit losses arising in the current year and its fair value.

If the Fair Value of a Debt Investment That Is