What is the major reason GAAP usually does not use liquidation values to measure assets?
A) It is not possible to determine what these values would be.
B) GAAP typically assumes companies are going concerns.
C) GAAP has a conservatism bias.
D) These would cause companies to pay too much in taxes.

Question

Quizplus · Accepted Answer

GAAP typically assumes companies are going concerns, meaning they will continue to operate and generate profits in the future. Therefore, using liquidation values, which assume the company will be sold off and its assets will be liquidated, would not be appropriate for measuring assets under GAAP.

What Is the Major Reason GAAP Usually Does Not Use