Asked by Vansh Arora on Jun 24, 2024
Verified
Once a company decides to use the fair value option to account for an equity method investment,the decision is irrevocable.
Fair Value Option
An accounting option that allows companies to record certain financial assets and liabilities at their fair value, reflecting current market conditions.
Equity Method Investment
An accounting approach used for recording investments in subsidiary companies where the investor has significant influence but not full control.
- Acquire knowledge on the accounting processes for trading securities, covering the adjustments for fair value and the documentation of unrealized gains and losses.
- Distinguish the variations in accounting methodologies for trading, available-for-sale, and equity securities.
Verified Answer
SG
sumielizabath georgeJun 27, 2024
Final Answer :
True
Explanation :
Once a company has adopted the fair value option for accounting for equity method investments, it cannot switch back to the equity method. The decision is irrevocable and must be applied consistently unless a change in accounting principles is deemed necessary under GAAP.
Learning Objectives
- Acquire knowledge on the accounting processes for trading securities, covering the adjustments for fair value and the documentation of unrealized gains and losses.
- Distinguish the variations in accounting methodologies for trading, available-for-sale, and equity securities.
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