What does subsequent measurement of a passive investment under Amortized Cost consider?

The subsequent measurement of a passive investment under Amortized Cost involves assessing the investment at its amortized cost, which includes the effective interest method for calculating the interest income. This method recognizes interest revenue on a constant yield basis, adjusting the carrying amount of the investment for any amortization of premiums or discounts over the life of the asset. Additionally, the investment must be assessed for impairment, where the carrying amount is compared to its recoverable amount. If there is an indicator of impairment, the investment may need to be written down to reflect the lower value.

The approach specifically ensures that the focus remains on the financial performance derived from the underlying cash flows of the investment, in contrast to adjustments based on market values or sales activities in the secondary market. This approach is fundamental to the amortized cost model, which is applied to financial assets that are held to collect contractual cash flows rather than for trading purposes. Thus, the correct answer encapsulates the essence of measuring passive investments under this particular framework.