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If a Company Elects to Use the Fair Value Option

question 31

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If a company elects to use the fair value option at initial recognition,unrealized gains and losses at year-end are reported as part of other comprehensive income.


Definitions:

Initial Investment

The initial amount of money spent to start a project, purchase an asset, or embark on a financial venture, prior to any earnings or gains.

Conversion Ratio

A specific number of shares a bondholder can receive for each bond if they choose to convert it into stock.

Market Value

The present cost at which a service or asset is available for purchase or sale in the market.

Bond Exchange

The process of trading bonds in the financial markets or swapping one bond for another to achieve better investment goals.

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