A company has defaulted on its most recent interest payment to a company holding its bonds. The bonds have been accounted for as amortized cost investment. The company must now recognize a loss equal to the present value of the company's expected credit losses over the next 12 months.

Question

Quizplus · Accepted Answer

For amortized cost investments, entities are required to recognize an allowance for expected credit losses over the lifetime of the asset, not just the next 12 months, reflecting all reasonable and supportable information, including forward-looking elements.

A Company Has Defaulted on Its Most Recent Interest Payment