- CFA Exams
- 2021 CFA Level I Exam
- Study Session 8. Financial Reporting and Analysis (3)
- Reading 28. Non-current (Long-term) Liabilities
- Subject 1. Accounting for Bond Issuance, Bond Amortization, Interest Expense, and Interest Payments
CFA Practice Question
When a company has floating-rate debt, it periodically revalues its debt for changes in the market rate of interest. True or False?
Correct Answer: False
Since the contract interest rate of floating-rate debt changes as the market rate changes, the book value of the debt is always exactly equal to its market value. Also, under GAAP, firms may not make entries to change the value of any type of debt due to changing interest rates.
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