Final answer:
The statement is true as tests related to realizable value change based on the security type and the accounting standard applied, whether it's GAAP, IFRS, or another. Securities are assessed differently based on their categorization, which affects how impairment tests and valuations are conducted.
Step-by-step explanation:
The statement is true. Tests related to realizable value do indeed vary according to the type of security and the accounting standards applied. For financial reporting purposes, securities such as stocks, bonds, and other financial instruments must be evaluated for impairment or declines in value that are other than temporary. The definition of realizable value and the tests applied can differ based on whether the securities are classified as held-to-maturity, available-for-sale, or trading securities according to the relevant accounting standards like GAAP or IFRS.
For example, available-for-sale (AFS) securities are assessed for impairment based on their fair value relative to cost, and if the fair value is less, an assessment is made to determine if the impairment is temporary or other than temporary. Held-to-maturity securities, on the other hand, are tested in the context of the present value of expected future cash flows discounted at the security's original effective interest rate.
The above process ensures that the financial statements reflect a conservative and realistic assessment of the securities' values, providing relevant information for stakeholders and maintaining consistency with the principles of the accounting standards involved.