CFA Practice Question
Current liabilities are recorded at ______.
A. the lower of cost or market value
B. their maturity value
C. their present value
Explanation: While all assets and liabilities, for analysis purposes, should be considered at their fair present value, the short horizon of current liabilities means that in practice, they are recorded at their face value. This means that the stated principal value of the liability is recorded as is, without factoring in interests expenses. This practice covers current liabilities arising from both operating activities (like advance payments and taxes payable) and financing activities (like accounts payable and short-term loans).
User Contributed Comments 12
| User | Comment |
|---|---|
| humphrey | what about marketable securities? |
| shasha | i guess you're referring to other firms' securities, which are current assets, not c.l. |
| Munyoli | What is the diff. btw the mkt value (fair value) and the matrurity value? are they not the same? |
| steved333 | see fixed income valuation section. if you don't know the difference b/w market and maturity value, you need to start there. and good luck on this test... |
| Dinosaur | diff between market value and maturity value should be the time value of money atleast |
| iambroke | so is the explanation saying that we dont discount it since the time horizon is short? |
| stupee | discount current liabilities? What were you talking about, iambroke? |
| Mikehuynh | A is for inventory |
| moneyguy | ...and "good luck" to you too, steved333. Way to get that jab in there. Feel better about yourself? |
| birdperson | ^second moneyguy's comment... that was lame, steve. |
| Suharevat | good question |
| Caliph | With moneyguy on this one |