. Which of the following statements is true? a. The fair value option requires that some types of financial instruments be recorded at fair value. b. The fair value option requires that all noncurrent financial instruments be recorded at amortized cost. c. The fair value option allows, but does not require, that some types of financial instruments be recorded at fair value. d. The FASB and IASB would like to reduce the reliance on fair value accounting for financial instruments in the future.

. Which of the following statements is true? a. The fair value option requires that some types of financial instruments be recorded at fair value. b. The fair value option requires that all noncurrent financial instruments be recorded at amortized cost. c. The fair value option allows, but does not require, that some types of financial instruments be recorded at fair value. d. The FASB and IASB would like to reduce the reliance on fair value accounting for financial instruments in the future.

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter13: Marketable Securities And Derivatives

Section: Chapter Questions

Problem 8Q

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Which of the following statements is true?(a) The fair value option requires that some types of financial instruments be recorded at fair value.(b) The fair value option requires that all concurrent financial instruments be recorded at amortized cost.(c) The fair value option allows, but does not require, that some types of financial instruments be recorded at fair value.(d) The FASB and IASB would like to reduce the reliance on fair value accounting for financial instruments in the future.
What is the fair value option? Briefly describe the controversyof applying the fair value option to financial liabilities.
All of the following are true of the effect of fair value accounting on the financial statements except: a. any difference between the original cost or the prior period’s fair value must be recorded b. changes in the fair value of trading securities are recognized on the income statement c. valuation allowance accounts are reported on the balance sheet d. changes in the fair value of available-for-sale securities are recognized on the income statement
Which of the following is correct about subsequent measurement of financial asset at fair value? a. the financial asset shall be measured at fair value if the business model is not to collect contractual cash flows on specified dates and the contractual cash flow ae not solely payment of principal and interest. b. An entity may designate a finacncial asset as measured at fair value through profit or loss even if the financial asset satisfies the amortized cost measurement. c. both are correct d. both are incorrect
The use of the fair value option to account for Non - current liabilities is allowed by IFRS . Many companies would prefer to use the fair value option . Do you agree ? Explain why .
The use of fair value to account for debt investments allows for more relevance of accounting figures because they would reflect the latest market assessment and opinion regarding these instruments. a. Do you agree with this statement? Explain why. b. What are the possible disadvantages’ of using the fair value accounting?
Which statement is true when a debt investment at amortized cost is reclassified to FVOCI? a. All these statements are true. b. The difference between the previous carrying amount and fair value at reclassification date is recognized in other comprehensive income. c. The original effective rate is not adjusted d. The debt investment is measured at fair value at reclassification date.
Which of the following is correct regarding the classification of investment in debt instruments as financial asset at fair value through OCI? a. This classification is not allowed for investment in debt instruments. b. An entity may make an irrevocable election to classify investment in a debt instrument that is not ‘held for trading’ as such. c. In order to be classified as such, a debt instrument needs to both have simple principal and interest cash flows and be held in a business model in which both holding and selling financial assets are integral to meeting management’s objectives. d. All of the above.
The use of fair value to account for debt investments allows for more relevance of accounting figures because they would reflect the latest market assessment and opinion regarding these instruments. b. What are the possible disadvantages’ of using the fair value accounting?
If an entity has elected to use the fair value option for a financial liability; a. It is measured at fair value through other comprehensive income. b. It is measured at fair value through profit or loss. c. It is measured at amortized cost. d. Fair value op don is prohibited for financial liabilities.
Question: Why is it that fair value's are thought to be more relevant in some financial reporting situations? Please Explain.
Which statement is incorrect regarding reclassification of financial assets? All reclassifications out of FVTOCI measurement category result in 'reclassification. adjustment. The effective interest rate and the measurement of expected credit losses are not adjusted as a result of the reclassification from AC measurement category to FVTOCI and vice versa. Reclassifications to FVTPL measurement category result to amounts recognized in profit or loss. The effective interest rate is determined on the basis of the fair value of the asset at the reclassification date when an entity reclassifies a financial asset out of FVTPL measurement category.