U.S.GAAP requires that all long-term monetary liabilities appear on the balance sheet at the
A)future value of the present cash payments.
B)total value of the future cash payments.
C)imputed value of the future cash payments.
D)present value of the future cash payments.
E)historical cash proceeds from debt issuance.

Question

Quizplus · Accepted Answer

U.S.GAAP requires that all long-term monetary liabilities appear on the balance sheet at the present value of the future cash payments. This is because it reflects the economic reality that the borrower will have to pay back an amount that is less than the total amount borrowed, since interest accrues over time. Present value calculations discount future cash flows to reflect the time value of money.

USGAAP Requires That All Long-Term Monetary Liabilities Appear on the Balance