The use of fair value rather than historical cost increases both the relevance and verifiability of the financial statements.

Question

Quizplus · Accepted Answer

Fair value increases the relevance of financial statements by providing current market values, which are more useful for decision-making, but it can decrease verifiability because fair values (especially for non-market-traded assets) often require estimates and judgments, making them less objective and harder to verify than historical costs.

The Use of Fair Value Rather Than Historical Cost Increases