Which of the following is not true regarding the fair value option for marketable securities and derivatives?
A)Subsequent to the acquisition of a derivative, the firm may report changes in fair value of derivatives in Other Comprehensive Income.
B)Subsequent to the acquisition of a derivative, the firm may report changes in fair value of derivatives, but they have no effect on any lines of the statement of cash flows.
C)Firms using the fair value option mark the carrying value of the asset to fair value each period.
D)If the change in fair value of the derivative decreases carrying value, then the firm reports the amount of that decrease as a loss during the current period.
E)If the change in fair value of the derivative decreases carrying value, then the cash flow from operations sections shows a subtraction for the loss.

Question

Quizplus · Accepted Answer

The statement "If the change in fair value of the derivative decreases carrying value, then the cash flow from operations sections shows a subtraction for the loss" is not true. Changes in the fair value of derivatives do not affect cash flows from operations, but rather they are reported in either Other Comprehensive Income or the income statement.

Which of the Following Is Not True Regarding the Fair