intermediate accounting

On January 1, 2014, ACS issued $1,500,000, 5%, 7-year bonds. Interest on the bonds is paid semimanual on June 30 and December 31. The market interest for bonds of similar risk and maturity was 6%. ACS was aware that the GAAP allowed companies to switch from the effective interest method to fair value method with little justification. On December 31, 2018, market interest rates increased to 8%, thus prompting ASC to switch to the fair value method to account for its bonds. On that same date, the fair value of the bond issue was estimated at $1,418,321. Although, IFRS does allow the use of fair value to account for liabilities, there are many restrictions and requirements. Unfortunately, ASC did not meet these requirements, which meant that the set financial statement produced for the listing on the ASX had to continue using the effective interested method.