What is the primary method of derecognizing passive investments under amortized cost?

In the context of financial reporting, particularly under the amortized cost method, the primary way to derecognize passive investments involves recognizing gains and losses in profit or loss. This process occurs when financial assets are sold or otherwise disposed of, where any difference between the carrying amount of the investment and the proceeds received from its sale is recognized in the income statement.

This approach aligns with the accounting principles that require entities to reflect their performance accurately within their financial statements. Recognizing gains and losses ensures that the financial statements provide a true and fair view of the company's financial health by capturing the economic reality of the transaction.

Other options, such as transferring to other income accounts or revaluing before derecognizing, do not align with the standard practices for amortized cost. Additionally, stating that no recognition is required contradicts the fundamental requirement of the financial reporting framework to account for all applicable financial transactions in a transparent manner.