All of the following are true of the effect of fair value accounting on the financial statements except
A) any difference between the original cost or the prior period's fair value must be recorded
B) changes in the fair value of trading securities are recognized on the income statement
C) valuation allowance accounts are reported on the balance sheet
D) changes in the fair value of available-for-sale securities are recognized on the income statement

Question

Quizplus · Accepted Answer

Changes in the fair value of available-for-sale securities are recognized in other comprehensive income, not on the income statement. This is a key distinction in how different types of securities are reported under fair value accounting.

All of the Following Are True of the Effect of Fair