Broadfield Co purchased 5% debentures in X co at 1 January 2013 (their issue date) for KSh.100,000. The term of the debentures was 5 years and the maturity value is KSh.130,525. The effective rate of interest on the debentures is 10% and the company has classified them as held-to-maturity financial asset. At the end of 2014 X Co went into liquidation. All interest had been paid until the date. On 31 December 2014 the liquidator of X Co announced that no further interest would be paid and only 80% of the maturity value would be repaid, on the original repayment date. The market interest rate on similar bonds is 8% on that date.

Required a)What value should the debentures have been stated at just before the impairment became apparent? b)At what value should the debentures be stated at 31 December 20 x 4, after the impairment? How will the impairment be reported in the financial statements for the year ended 31 December 20 x 4?