What value should a government report for its share in a guaranteed investment pool if the fair value is less than the guaranteed value?

A government should report its share in a guaranteed investment pool at the guaranteed value when the fair value is less than the guaranteed value. This principle is grounded in the concept of conservatism in accounting, which aims to avoid understating an entity's financial position. Recognizing the guaranteed value reflects the minimum amount the government expects to receive, ensuring that stakeholders have an accurate representation of the assets' worth.

In this context, using the guaranteed value helps maintain transparency and reliability in financial reporting by acknowledging the potential loss due to the dip in fair value. Fair value may fluctuate based on market conditions, but if there is a guarantee from another party, the government should prioritize this assurance. Thus, reporting at the guaranteed value provides a clearer and more stable view of the investment's value that is insulated from market volatility.

Utilizing fair value instead would not capture the security provided by the guarantee, potentially misleading decision-makers about the financial position. The other choices, such as amortized cost or price per company policy, do not apply in this scenario, as they do not fully represent the government's guaranteed right to the investment's value.