Which of the following is a disadvantage to using fair value to account for financial assets?
A) GAAP requires fair values to be determined at the date the assets were bought, so different assets are evaluated at different dates.
B) Fair value is never relevant information.
C) Because there are not perfect markets for some assets, fair value may require some judgmental estimates.
D) Fair value accounting ignores holding gains and losses.

Question

Quizplus · Accepted Answer

Because fair value accounting requires assets to be valued at their current market value, some assets may not have perfectly efficient markets, and estimates or judgments may be required. This introduces an element of subjectivity and potential error into the accounting process. However, options A, B, and D are incorrect. GAAP does not require assets to be evaluated on different dates, as they should be valued at their current market value. Fair value is also relevant information, and fair value accounting does not disregard holding gains and losses.

Which of the Following Is a Disadvantage to Using Fair