If the fair value of a held-to-maturity investment declines for a reason that is viewed as "other than temporary" because the company has incurred a credit loss on the investment:
A) The investment is written down to fair value, and only the noncredit-loss component of the impairment loss is recognized in net income.
B) The investment is written down to fair value, and the entire impairment loss is recognized in net income.
C) The investment is written down to fair value, and only the credit-loss component of the impairment loss is recognized in net income.
D) The investment is written down to fair value, but none of the impairment loss is recognized in net income.

Question

Quizplus · Accepted Answer

The investment is written down to fair value, and only the credit-loss component of the impairment loss is recognized in net income. This approach aligns with accounting standards that differentiate between credit losses and other types of impairment, recognizing the former in net income.

If the Fair Value of a Held-To-Maturity Investment Declines for a Reason