If an Asset Value Increases, What Is the Amount of the Increase

question 95

Multiple Choice

If an asset value increases, what is the amount of the increase that is recognized according to GAAP?

• A) The difference between the net asset cost and the new asset value.
• B) The difference between the original cost of the asset and the new value of the asset.
• C) The difference between the fair value and the expected future cash flows from the asset.
• D) No increase is recognized.

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Definitions:

Available-For-Sale Debt Investments

Financial assets in the form of debt securities that a company intends to hold for a period but are not classified as held-to-maturity or trading securities.

Held-To-Maturity Classification

A financial accounting term for bonds or other debt securities that a firm intends to hold until they mature.

Fair Value Adjustment

An adjustment made to the carrying value of an asset or liability to reflect its value at current market conditions.

Unrealized Gain

A profit that exists on paper resulting from an investment that has increased in value but has not yet been sold for cash.