Final answer:
The effective-interest method of amortization is required under IFRS because it provides a more accurate reflection of the bond's cost over its life, ensuring that financial statements present relevant and reliable financial information.
Step-by-step explanation:
The effective-interest method of amortization is required under the International Financial Reporting Standards (IFRS) primarily because it provides a more accurate reflection of a bond's cost over its life. This method aligns with the IFRS’s goal of presenting financial information that is transparent, comparable, and reflective of the economic reality. Under this method, the amount of interest expense recognized in each period is based on the bond's carrying amount at the beginning of the period and the effective interest rate, which represents the market rate at the time of issuance.
Unlike the straight-line method, which allocates an equal amount of bond discount or premium to interest expense over each period, the effective-interest method results in a varying interest expense that decreases as the bond's carrying amount approaches its face value. It does not simplify accounting procedures (option a) or reduce interest expense (option c). Instead, it ensures that financial statements provide relevant and faithful representations of an entity’s financial performance, which is a core principle of IFRS. Contrary to option (d), the International Financial Reporting Standards do not focus solely on historical cost principles, but rather on reflecting the economic substance of transactions.