Assets acquired under multi-year deferred payment contracts are:
A) Valued at their fair value on the date of the final payment.
B) Valued at the present value of the payments required by the contract.
C) Valued at the sum of the payments required by the contract.
D) None of these answer choices are correct.

Question

Quizplus · Accepted Answer

Assets acquired under multi-year deferred payment contracts should be valued at the present value of the payments required by the contract, which reflects the time value of money. This approach is consistent with the principle of conservatism and provides a more accurate representation of the asset's true economic value. Valuing the assets at their fair value or the sum of the payments required by the contract would not properly reflect the timing and uncertainty of future payments.

Assets Acquired Under Multi-Year Deferred Payment Contracts Are