The Fair Value Adjustment for Non-Trading Securities

question 131

Multiple Choice

The fair value adjustment for non-trading securities

• A) is reported as an increase to net income when the fair value of investments is greater than cost.
• B) is prohibited because these securities must be reported at cost.
• C) is reported as a separate component of equity on the statement of financial position.
• D) is only allowed when the fair value of investments is less than cost.

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Definitions:

Eugene Fama

An American economist and Nobel laureate known for his work on the efficient-market hypothesis.

Risk-Adjusted Performance

A measure of how much risk is involved in producing a financial return, used to compare the performance of investment portfolios.

Comparison Universe

A benchmark or pool of investments used to evaluate the performance of a specific investment or portfolio.

Mutual Funds

Professionally managed investment initiatives that are bankrolled by stockholders and trade across assorted holdings.