What are the ethical considerations in making subjective valuations of these complex financialinstruments?

Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter8: Investing Activities
Section: Chapter Questions
Problem 10QE
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Financial assets include stocks and bonds.
These are fairly simple securities that
canoften be valued using quoted market
prices. However, there are more complex
financialinstruments that do not have quoted
market prices. These complex securities must
still bevalued on the balance sheet at fair
value. Generally accepted accounting
principles requirethat the reporting entity use
assumptions in valuing investments when
market prices or critical valuationinputs are
unobservable.
What are the ethical considerations in making
subjective valuations of these complex
financialinstruments?
Transcribed Image Text:Financial assets include stocks and bonds. These are fairly simple securities that canoften be valued using quoted market prices. However, there are more complex financialinstruments that do not have quoted market prices. These complex securities must still bevalued on the balance sheet at fair value. Generally accepted accounting principles requirethat the reporting entity use assumptions in valuing investments when market prices or critical valuationinputs are unobservable. What are the ethical considerations in making subjective valuations of these complex financialinstruments?
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