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How do i treat variabilities in fair values of bonds in IFRS 9


COAF 4201 - DUE DATE 04/05/2018
A.    Brad Limited bought listed bonds issued by Butter Limited on 1 January 2015 for $1 519 530. The details of the Butter Limited bonds are as follows:
    Nominal value $1 400 000
    Redemption date : 31 December 2018
    Redemption amount $1 575 000 ( including a $175 000 premium)
    Interest rate ( coupon rate ) of 10% per annum in arrears
    Effective interest rate is 10%
The bonds are held within a portfolio that is managed with the objective of collecting both contractual cash flows from selling the assets.
Butter Limited’s financial health and ability to settle bond payments is as follows:
Year ended    Financial health
$    Excepted coupon payments
$    Expected redemption
$
31 December 2016    Weak    0 (i.e. for the remainder of the term)    1 575 000
31 December 2017    Recovering    35 000 ( in 2018)    1 575 000

An analysis of the fair values and expected credit losses for these listed bonds is presented below:
Date                                                                                                                                                        
          Fair value    expected credit  12 month   Lifetime

1 January 2015     1 519 530    26 250    134 400
31 December 2015    1 580 000    23 600    123 000
31 December 2016    1 200 000    96 000    242 980
31 December 2017    1 280 000    57 150    233 000

asked Apr 30 in IFRS 9 - Financial Instruments by MacGeorge

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