Analysts try to remove holding gains from reported FIFO income because
A)the FEI's code of professional ethics requires that they do so if possible.
B)holding gains understate management's true performance.
C)they are potentially unsustainable.
D)None of these is appropriate reasons for removing holding gains from reported FIFO income.

Question

Quizplus · Accepted Answer

Holding gains are gains that arise from holding an asset or security above its book value. They are considered potentially unsustainable because they are dependent on market fluctuations and may not be realized in future periods. Therefore, analysts try to remove holding gains from reported FIFO income to get a more accurate picture of the company's underlying performance. Choices A and B are not appropriate reasons for removing holding gains, while choice D is not a correct statement as the answer is C.

Analysts Try to Remove Holding Gains from Reported FIFO Income