The Fair Value Option Allows a Company to

question 133

Multiple Choice

The fair value option allows a company to

• A) value its own liabilities at fair value.
• B) record income when the fair value of its bonds increases.
• C) report most financial instruments at fair value at any point of time.
• D) All of the above are true of the fair value option.

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Definitions:

Lease Term

The period during which a lessee has the right to use an asset, as stipulated in a lease agreement.

Economic Life

The estimated period over which an asset is expected to be economically useful to one or more users.

Present Value

Present Value is the current worth of a future sum of money or stream of cash flows given a specified rate of return, reflecting the time value of money.

Capital Lease

A lease agreement that is treated like an asset purchase for accounting purposes, where the lessee obtains the benefits and risks of ownership.