Which Is a True Statement Regarding the Fundamental Requirement of Accounting

question 30

Multiple Choice

Which is a true statement regarding the fundamental requirement of accounting for derivatives?

• A) Derivatives are reported on the balance sheet only as an asset.
• B) Derivatives are reported on the balance sheet only as a liability.
• C) Changes in derivative cost basis are recorded in the asset value.
• D) Changes in derivative fair value are included in comprehensive income.
• E) Changes in derivative cost basis are recorded in the liability value.

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Definitions:

Times Interest

A financial ratio that measures a company's ability to meet its interest payments based on current earnings. Often referred to as the interest coverage ratio.

Stock Market

A public market for the trading of company stock and derivatives at agreed upon prices.

Economic Value Added

A measure of a company's financial performance based on the residual wealth calculated by deducting its cost of capital from its operating profit.

Residual Income

Another term for economic value added (EVA).