If a Company Elects the Fair Value Option to Account

question 103

Multiple Choice

If a company elects the fair value option to account for equity securities, what will be recorded differently when there is no significant influence?

• A) Unrealized Gains and Losses will now be reported as part of Net Income instead of Other Comprehensive Income.
• B) Dividends received from the investee will now be credited to Dividend Revenue instead of as a reduction to the investment account.
• C) A proportionate share of net income will no longer need to be recorded for these equity securities.
• D) There is no difference in accounting for equity securities with no significant influence as these are already accounted for using the fair value method.

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Definitions:

Incorrect Majority

The phenomenon where a group wrongfully influences an individual or minority to conform to a mistaken or inaccurate viewpoint.

Groupthink

A mental effect experienced by a group, where the pursuit of agreement or uniformity leads to illogical or inefficient outcomes in decision-making.

Irving Janis

A psychologist best known for his research on group dynamics, including the concept of "groupthink."

Groupthink

A psychological phenomenon that occurs within a group of people, where the desire for harmony or conformity in the group results in an irrational or dysfunctional decision-making outcome.