- CFA Exams
- CFA Level I Exam
- Study Session 5. Financial Reporting and Analysis (1)
- Reading 13. Intercorporate Investments
- Subject 2. Investments in Financial Assets
CFA Practice Question
What does the FASB require regarding the disclosure of the fair value of financial instruments?
A. A company must not disclose the fair value of financial instruments because accounting emphasizes historical costs not fair values.
B. A company must disclose the fair value of financial instruments in the footnotes to the financial statements.
C. A company must disclose the fair value of financial instruments either on the face of the balance sheet or in the footnotes to the financial statements.
Explanation: Companies must disclose the market value of financial instruments either on the face of the balance sheet or in the footnotes to the financial statements.
User Contributed Comments 3
| User | Comment |
|---|---|
| murli | Disclosure of Fair value is important not the place! |
| ThePessimist | Place is important too. E.g. held to maturity investments must be shown on the balance sheet at amortized cost with fair value shown in a footnote. Each category has specific rules. |
| dblueroom | I agree with ThePessimist that i.e. trading and available-for-sale securities are recorded at FMV. Held-to-maturity investments however are recorded at cost on the statement, but you do have a separate account for amortization of premium/discount. |