Which of the following statements about fair value is true?Fair value accounting is also known as "mark-to-market" accounting.O Level 3 inputs are observable market prices for similar assets in active markets.O Fair value is a measure of market-based entry value.O Level 1 inputs should be used to determine fair value only when Level 2 and Level 3 inputs are not available.

The objective of this question is to identify the correct statement about fair value in accounting.

Answered: Which of the following statements about…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Which two economic concepts are fundamental to the relevance of fair values to accounting? i. The Efficient Markets Hypothesis ii. Supply and Demand iii. Economic Rationalism iv. Marginal Utility Which of the following is NOT a transaction cost that should be considered in the calculation of fair value? a. Costs associated with marketing the item. b. Transport costs. c. Agent's selling fees. d. None of the above, i.e. they are all transaction costs.
Why is the application of fair value principle in measuring the financial position less objective than that of the cost principle? Illustrate with an example the necessary condition for fair value measurement to become more objective.
Fair Value Measurement Concept Question: What does it mean when fair value is paid to transfer a liability in an orderly transaction between market participants at the measurement date? Please explain or give an example for understanding.
Does GAAP distinguish between fair values that are readily determinable from current market prices versus those needing to be calculated based on the company’s own assumptions? Explain how a user will know about the reliability of the inputs used to determine fair value.
When allocating the transaction price to performance obligations when a stand-alone selling price is not readily observable, GAAP suggests all of the following approaches except the expected market margin approach. residual approach. expected cost plus a margin approach. adjusted market assessment approach.
Which of the following does NOT accurately describe the requirements to apply relative valuation? a. The market value of the comps should be available. b. The valuation object should be compared with similar firms, preferably in industry, size, market and other measures. c. The market value of the valuation object should be available. d. The prices of the comps should be standardized, meaning a price ratio instead of the absolute price value should be compared.
1.What are the main arguments against the old definition (i.e. the one presented in Appendix A of AASB 3) of fair value? 2.What is the new definition of fair value? Explain the key parts to this definition. 3.Why has the IASB chosen to use exit price as the primary measure of fair value? 4.The existence of a market is very important to determining fair value. What factors would indicate an appropriate market exists?
choose the correct answer: Equity security acquired for trading should be measured at reporting date a. cost, being the purchase price b. cost, being the purchase price plus transaction costs c. fair value, with change in FV taken through profit or loss. d. fair value, with change in FV taken through other comprehensive income.
Following IFRS, which statement is false? Group of answer choices The revaluation surplus account is a specific account reported as an unrealized gain in the statement of comprehensive income. If the revaluation initially increases the long-term operating asset's carrying value, the firm records the difference between the carrying value and the fair value (the unrealized gain) in the revaluation surplus account. The revaluation surplus account is a specific account reported in other comprehensive income (OCI) in the statement of comprehensive income. If a long-term operating asset's fair value decreases in subsequent accounting periods, after an earlier write-up, the firm reduces the revaluation surplus if it exists.
In general it argued that the lower of cost of market rule is supported most closely by which of the following theoretical assumptions? a. Revenue Recognition.b. Conservatism.c. Historical Cost.d. Going Concern Assumption.
How does the fair value model differ from the revaluation model? Question 4 options: a Increases in carrying amount above a cost-based measure are recognized in equity b Changes in fair value are recognized in profit or loss c a and b d neither a or b
. The word market as used in “the lower of cost or market” generally meansa. net realizable value.b. liquidation price.c. retail market price.d. original cost.

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