Question

Which of the following statements regarding the use of fair value (instead of the use of amortized or depreciated cost) for long-lived assets is correct?

A. None of the above statements are correct.

B. The use of fair value tends to provide more relevant information.

C. The use of fair value always provides more reliable information.

D. The use of fair value is often justified by cost-benefit considerations.

Answer 1

• Fair value measurement is a more relevant and realistic way of valuing long lived assets than the use of amortized or depreciated cost.
• The main benefit of fair value accounting is that it measures assets and liabilities at an accurate value than that presented in the financial statements according to historical or cost method of accounting.
• With fair value measurement, the company increases and decreases the value of a long lived asset according to the change in market.
• Fair value gives the most relevant and timely measurement of assets and liabilities.

The statement that is correct regarding the use of fair value (instead of the use of amortized or depreciated cost) for long-lived assets is: The use of fair value tends to provide more relevant information.

Answer is B. The use of fair value tends to provide more relevant information.