If the Fair Value of a Held-To-Maturity Investment Declines for a Reason

question 134

Multiple Choice

If the fair value of a held-to-maturity investment declines for a reason that is viewed as "other than temporary" because the company has incurred a credit loss on the investment:

• A) The investment is written down to fair value, and only the noncredit-loss component of the impairment loss is recognized in net income.
• B) The investment is written down to fair value, and the entire impairment loss is recognized in net income.
• C) The investment is written down to fair value, and only the credit-loss component of the impairment loss is recognized in net income.
• D) The investment is written down to fair value, but none of the impairment loss is recognized in net income.

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Definitions:

Debt to Total Assets

A financial ratio that shows the proportion of a company's assets that are financed through debt.

Basic Earnings per Share

A measure of a company's profitability, calculated by dividing net income by the number of outstanding common shares.

Industry Averages

Statistical measures that represent the typical value or norm within a particular industry, used for benchmarking and comparative analysis.

Horizontal Analysis

Horizontal analysis, also known as trend analysis, is a financial analysis technique that compares historical financial data over a series of periods to identify trends, increases, or decreases in financial performance.