Susqua,Inc.has held-to-maturity debt securities it purchased in 2014.At December 31,2015,Susqua,Inc.reported a $120,000 impairment loss related to these securities.During 2016,the debtor was successful in registering a new patent which improved the debtor's operating outlook.This change of events resulted in a reversal of $45,000 of the impairment loss.At December 31,2016,the fair value of the debt securities had increased by $68,000 over the impaired value previously recorded.Susqua,Inc.uses IFRS for its external reporting.How much,if any,of this reversal can Susqua,Inc.report in its income for 2016?

Question

Quizplus · Accepted Answer

Under IFRS, once a debt security is impaired, the reversal of the impairment loss can never exceed the original impairment loss. Therefore, Susqua, Inc. can report $45,000 ($120,000 - $45,000) in its income for 2016 as a reversal of the previous impairment loss. The increase in the fair value ($68,000) cannot be recognized in income as the securities are still categorized as held-to-maturity and not reported at fair value.