U.S.GAAP and IFRS require firms to disclose the fair value of long-term notes and bonds in notes to the financial statements.Fair value is
A)the amount the firm would pay to settle the debt on the date of the balance sheet.
B)the current market price in the case of items that trade in active markets.
C)the present value of the contractual cash flows discounted at a current market interest rate that reflects all the factors that market participants would consider, including the item's credit risk.
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

Fair value under both U.S. GAAP and IFRS is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This includes the amount a firm would pay to settle the debt on the balance sheet date (A), the current market price for items that trade in active markets (B), and the present value of the contractual cash flows discounted at a current market interest rate that reflects all factors market participants would consider, including the item's credit risk (C). Therefore, all of the provided options (A, B, and C) are aspects of determining fair value.

USGAAP and IFRS Require Firms to Disclose the Fair Value