Case 10.7 Impaired Abilities

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In this case we deal with two different scenarios. In the first scenario we have to deal with two types of investments, one is municipal bond and the other one is corporate bond. In the second scenario we deal with common shares. Below listed codifications Support these scenarios. Relating to scenario A, my estimation of the fairness of the client’s assumption regarding its investment portfolio that the securities are not other-than-temporarily impaired is based on the following information/codifications stated below. ASC 360-10-20: Impairment is the condition that exists when the carrying amount of a long-lived asset (asset group) exceeds its fair value. According to the codification stated above: Municipal bonds amortized costs $8,500,000 exceeds its fair value of $7,500,000. Corporate bonds amortized costs $8,200,000 exceeds its fair value of $6,800,000. Therefore impairment exists. ASC 320-10-35-33A: If an entity intends to sell the debt security (that is, it has decided to sell the security), an other-than-temporary impairment shall be considered to have occurred. ASC 320-10-35-33B: If an entity does not intend to sell the debt security, the entity shall consider available evidence to assess whether it more likely than not will be required to sell the security before the recovery of its amortized cost basis (for example, whether its cash or working capital requirements or contractual or regulatory obligations indicate that the security will be required to be sold before a forecasted recovery occurs). If the entity more likely than not will be required to sell the security before recovery of its amortized cost basis, an other-than-temporary impairment shall be considered to have occurred. ASC 320-10-35-33C: If an entity does not expect to recover the entire amortized cost basis of the security, the entity would be unable to assert that it will recover its
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