When it comes to measuring investments, which of the following statements is true?
A) Companies are required to measure at cost/amortized cost.
B) Companies are required to measure at fair value.
C) Both cost/amortized cost and fair value are permitted in appropriate circumstances.
D) The company may report using whichever method best aligns with their financial reporting objectives.

Question

Quizplus · Accepted Answer

Both cost/amortized cost and fair value are permitted in appropriate circumstances. The method used to measure investments depends on the purpose of the investment and the company's goals. Financial instruments that are held to maturity are measured at amortized cost, while trading securities are marked to fair value. Available-for-sale securities can be measured at fair value, but can also be measured at cost. It is important to choose the appropriate method for each investment to accurately reflect its value on the balance sheet.

When It Comes to Measuring Investments, Which of the Following