The Fair Value Principle

question 86

Multiple Choice

The fair value principle

• A) is one of the two costing principles followed by the IASB.
• B) is more useful than the historical cost principle for valuing some assets.
• C) dictates that an asset should be valued at the price at which it could be sold.
• D) All of these answer choices are correct.

---

Definitions:

Moral Hazard

The risk that a party insulated from risk may behave differently than if they were fully exposed to the risk.

Underpricing

Underpricing refers to setting the initial sales price of a new product or service below market value, often used to attract customers quickly.

Standby Basis

A term referring to a state of readiness without being actively engaged in a task, often used in reference to equipment or services available on-demand.

Equity Issue

The process by which companies issue new shares of stock to raise capital from public investors.