Markel Inc. has bonds outstanding during a year in which the general (risk-free) rate of interest has not changed. Markel elected the fair value option for the bonds upon issuance. What will the company report for the bonds in its income statement for the year?

Question

Quizplus · Accepted Answer

Because general interest rates did not change, we assume any change in the fair value is due to a change in credit risk, so any gain or loss would be reported as OCI. Therefore, no gain or loss is reported in the income statement. Only interest on the bonds would be reported.