Current GAAP Requires a Company to Disclose the Fair Value

question 58

Multiple Choice

Current GAAP requires a company to disclose the fair value of its financial instruments and to disclose all significant concentrations of credit risk due to its financial instruments.The FASB's rationale for this disclosure includes allowing readers to

• A)better identify major customers
• B)compute each company's risk
• C)better determine a company's financial flexibility
• D)compute liquidity ratios

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Definitions:

Mortgage Note

A legal document that obligates a borrower to repay a loan used to purchase a property, outlining the terms of the loan, interest rate, repayment schedule, and enforcement rights.

Installment Payments

Payments made regularly over time to settle a debt or purchase, dividing the total cost into smaller amounts.

Principal Balance

The outstanding amount of a loan or mortgage that remains to be paid, excluding interest.

Mortgage Note Payable

A liability in the form of a written promise to repay a specified amount of money, along with interest, secured by a mortgage on property.