To calculate the amount of interest to recognize each period for a bond investment (unless it held for trading purposes),
A) ASPE requires the use of the effective-interest method.
B) IFRS requires the use of the effective-interest method.
C) IFRS allows the use of either the effective-interest or the straight-line method.
D) ASPE requires the use of the straight-line method.

Question

Quizplus · Accepted Answer

IFRS requires the use of the effective-interest method to calculate the amount of interest to recognize each period for a bond investment, unless it is held for trading purposes. ASPE does not specify a specific method, but it is generally accepted that the effective-interest method is the most appropriate method to use. Therefore, choices A and D are incorrect. Choice C is partially correct in that IFRS allows for the use of either the effective-interest or straight-line method, but the effective-interest method is generally preferred.

To Calculate the Amount of Interest to Recognize Each Period