On January 2, 2015, Bellevue Holdings Ltd. purchased 5%, 10-year bonds with a face value of $200,000 at par. This investment is accounted for at amortized cost. On January 4, 2016, the investee company was experiencing financial difficulties. As a result, Bellevue evaluated the investment and determined the following:
• The present value of the cash flows using the current market rate was $195,000
• The present value of the cash flows using the original effective interest rate was $190,000
By June 30, 2016, the investee recovered from the financial difficulties and was no longer considered impaired.
a. Record all the impairment related transactions in 2015 and 2016 assuming Bellevue uses ASPE.
b. Record all the impairment related transactions in 2015 and 2016 assuming Bellevue uses IFRS (IAS 39).
c. How would the answer to part (b) change, had the investment been in equities such as shares?