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Describe the accounting for the fair value option.

Describe the accounting for the fair value option.

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Answer #1
1
Companies have the option to report most financial instruments at fair value, with all gains and losses related to changes in fair value reported in the income statement. This option is applied on an instrument-by-instrument basis.
2
The fair value option is generally available only at the time a company first purchases the financial asset or incurs a financial liability.
3
If a company chooses to use the fair value option, it must measure this instrument at fair value until the company no longer has ownership.
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