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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem

Ethics in Action

Financial assets include stock and bonds. These are fairly simple securities that can often be valued using quoted market prices. However, there are more complex financial instruments that do not have quoted market prices. These complex securities must still be valued on the balance sheet at fair value. Generally accepted accounting principles require that the reporting entity use assumptions in valuing investments when market prices or critical valuation inputs are unobservable.

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

To determine

Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.

To explain: The valuation of investments, when market value is not available

Explanation

The valuation of investments for which the fair market is not available, the valuation could be done using the basic mathematical models, or, personal knowledge, or risk evaluation. But all these valuation models are subject to variation because they are based upon some assumptions, prevailing conditions, and other inputs...

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