Questions:
My company purchased some bonds worth $69,000 that pay a 10% coupon semi-annually on January 1 2024. At the end of six months on June 30 2024, I checked the market and realized that interest rates have fallen and the value of these bonds has increased. The bonds that I purchased are now trading at $100,000. I have also received a semi-annual payment of interest of $3450. 

What are the main ways this can show up on my company's income statement according to the following applicable IFRS standards: Cost or Amortized Value, Fair Value Through Other Comprehensive Income,  and Measured at Fair Value through Profit and loss

What about on the balance sheet?

Reference answers:
# The Available Treatments According to IFRS

According to IFRS, there are three ways in which the financial instruments can be recorded in the financial statements.

The three treatments are as follows:

## Method 1. Cost or amortized value

This treatment is followed in the following conditions:
a. debt securities are to be held throughout their tenor.
b. debt securities that are loans and notes receivables
c. equity instruments that do not have reliable estimates of their fair value

## Method 2. Fair value through other comprehensive income
This treatment is followed in the following cases
a. debt securities which are held with the intent of collecting interest and principal as well as selling it.
b. equity instruments which are elected at purchase to be treated this way.

## Method 3. Measured at fair value through Profit and loss
This treatment is followed in the following cases
a. if none of the other two methods is assigned
b. financial instruments which are elected at purchase to be treated this way.

# Impact on the income statement as of June 30 2024

## Method 1. Cost or amortized value

Interest income in the income statement = $3450

The appreciation of the value of $31000 will not impact the income statement under this method.

## Method 2. Fair value through other comprehensive income
Interest income in the income statement = $3450

Unrealized gains (the rise in the value of the asset) = $31000 ($100000 - $69000) will appear in the other comprehensive income and not the income statement.

## Method 3. Measured at fair value through Profit and loss

Interest income in the income statement = $3450
Unrealized gains (the rise in the value of the asset) = $31000 ($100000 - $69000) will appear in the income statement.

# Impact on the balance sheet

## Method 1. Cost or amortized value

The bonds will initially be recognized at the cost which was $69000 as assets in the balance sheet on June 1 2024

In the equity section of the balance sheet, the interest of $3450 will be added to the retained earnings on June 30 2024.

## Method 2. Fair value through other comprehensive income

The bonds will initially be recognized at the cost which was $69000 as assets in the balance sheet on June 1 2024

The unrealized gains of $31000 will be added to the value of the bonds which will make the new value of the bonds $100000 on June 30 2024.

In the equity section of the balance sheet, the interest of $3450 will be added to the retained earnings on June 30 2024.

The unrealized gains of $31000 will be recorded in the Other Comprehensive Income section of the Equity on June 30 2024.

## Method 3. Measured at fair value through Profit and loss

The bonds will initially be recognized at the cost which was $69000 as assets in the balance sheet on June 1 2024

The unrealized gains of $31000 will be added to the value of the bonds which will make the new value of the bonds $100000  on June 30 2024.

In the equity section of the balance sheet, the interest of $3450 plus the gain in value of $31000 will be added to the retained earnings on June 30 2024.