Question

Which of the following statements does not accurately describe the fair-value method of accounting?

a. Investments for which current, reliable fair values exist are accounted for using this method
b. Held-to-maturity investments are not accounted for using this method
c. Dividends and interest received are recognized in current income
d. The investment is recorded on the balance sheet at its fair value
e. None of the above

Answer 1

Answer: Option (A)

Step-by-step explanation:

Fair values mostly tends to exist for the marketable security but this in terms does not state that this method is applicable. For instance if investor tends to control the entity with the traded equity, therefore the investment is centralized and thereby, fair-value method of accounting is not being used.

Therefore, from the given options we can state that option (A) does not precisely describes the fair value method.