Which of the Following Is Not True Regarding the Fair

question 141

Multiple Choice

Which of the following is not true regarding the fair value option for marketable securities and derivatives?

• A)Subsequent to the acquisition of a derivative, the firm may report changes in fair value of derivatives in Other Comprehensive Income.
• B)Subsequent to the acquisition of a derivative, the firm may report changes in fair value of derivatives, but they have no effect on any lines of the statement of cash flows.
• C)Firms using the fair value option mark the carrying value of the asset to fair value each period.
• D)If the change in fair value increases carrying value, then the firm reports a gain in income equal to the amount of the increase in carrying value during the current period.
• E)The cash flow from operations section shows an addition for the amount of the gain equal to the amount of the increase in carrying value of a derivative during the current period.

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Definitions:

Isostatic Rebound

The rise of land masses that were depressed by the weight of ice sheets during glaciation, occurring as the ice melts and the land slowly returns to its original elevation.

Metamorphic Rocks

Rocks that have been transformed by heat, pressure, or chemically active fluids, altering their original composition or structure.

Plutonic Rocks

Intrusive igneous rocks that crystallize deep underground from magma, such as granite and diorite.

Continental Crust

The relatively thick part of the Earth's crust that forms the large landmasses. It is generally older, less dense, and composed mainly of granite.