23. Rushia Company has an available-for-sale investment in the 10%, 10-year bond

Question

23. Rushia Company has an available-for-sale investment in the 10%, 10-year bonds of Pear Co. The
investment's carrying value is $3,200,000 at December 31, 2010. On January 9, 2011, Rushia learns that Pear
Co. has lost its primary manufacturing facility in an uninsured fire. As a result, Rushia determines that the
investment is impaired and now has a fair value of $2,300,000. In June, 2012, Pear Co. has succeeded in
rebuilding its manufacturing facility, and its prospects have improved as a result. If Rushia Company
determines that the fair value of the investment is now $3,900,000 and is using IFRS for its external financial
reporting, which of the following is true?
A. Rushia is prohibited from recording the recovery in value of the impaired investment.
B. Rushia may record a recovery of $900,000 through profit and loss.
C. Rushia may record a recovery of $700,000 through profit and loss.
D. Rushia may record a recovery of $1,600,000 through profit and loss.

Explanation / Answer

C. Rushia may record a recovery of $700,000 through profit and loss.

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