If a company chooses the fair value option for an asset or liability, all changes in the fair value of the asset (or liability), including unrealized gain and losses, will be included in net income.

Question

Quizplus · Accepted Answer

This is true. If a company chooses the fair value option for an asset or liability, any changes in fair value will be recognized in net income. This is in contrast to the historical cost method, where changes in fair value are not recognized until the asset is sold or the liability is settled.

If a Company Chooses the Fair Value Option for an Asset