Final answer:
The fair value option allows a company to report financial instruments at current market value, which includes recording income from increases in bond value and valuing a company's own liabilities at fair value.
Step-by-step explanation:
The fair value option allows a company to report most financial instruments at fair value at any point of time, record income when the fair value of its bonds increases, and value its own liabilities at fair value. Therefore, the correct answer is: 4) all of these choices are true of the fair value option. This accounting principle enables a company to reflect the current market conditions in its financial statements, which can be particularly useful for companies that have significant investments in financial instruments or issue bonds and stocks as part of their capital structure. The option provides potential advantages such as the ability to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently or to measure both at current market values.