Rell Corporation reports under IFRS No. 9. Rell has an investment in Tirish, Inc. bonds that Rell accounts for atamortized cost, given that the bonds pay only interest and principal and Rell’s business purpose is to hold the bondsto maturity. Rell purchased the bonds for €10,000,000. As of December 31, 2018, Rell calculates €750,000 ofcredit losses expected for default events occurring during 2019 and €450,000 of credit losses expected for defaultevents occurring after 2019. Required:1. Assume the Tirish bonds have not had a significant increase in credit risk. Prepare the journal entry to recordany impairment loss as of December 31, 2018.2. Assume the Tirish bonds have had a significant increase in credit risk. Prepare the journal entry to record anyimpairment loss as of December 31, 2018.3. Assume the Tirish bonds have not had a significant increase in credit risk, and that as of December 31, 2019,Rell calculates €650,000 of credit losses expected for default events occurring during 2020 and €350,000 ofcredit losses expected for default events occurring after 2020. Prepare the journal entry Rell would make withrespect to any impairment loss as of December 31, 2019.
Rell Corporation reports under IFRS No. 9. Rell has an investment in Tirish, Inc. bonds that Rell accounts for at
amortized cost, given that the bonds pay only interest and principal and Rell’s business purpose is to hold the bonds
to maturity. Rell purchased the bonds for €10,000,000. As of December 31, 2018, Rell calculates €750,000 of
credit losses expected for default events occurring during 2019 and €450,000 of credit losses expected for default
events occurring after 2019.
Required:
1. Assume the Tirish bonds have not had a significant increase in credit risk. Prepare the
any impairment loss as of December 31, 2018.
2. Assume the Tirish bonds have had a significant increase in credit risk. Prepare the journal entry to record any
impairment loss as of December 31, 2018.
3. Assume the Tirish bonds have not had a significant increase in credit risk, and that as of December 31, 2019,
Rell calculates €650,000 of credit losses expected for default events occurring during 2020 and €350,000 of
credit losses expected for default events occurring after 2020. Prepare the journal entry Rell would make with
respect to any impairment loss as of December 31, 2019.
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