A firm has decided to use the fair value option to record the value of a long-term liability. if the fair value of the liability

Question

alekssr [168]

3 years ago

7

A firm has decided to use the fair value option to record the value of a long-term liability. if the fair value of the liability

decreases, how should the firm respond?

Business

1 answer:

emmainna [20.7K] · Answer 1 · 2021-12-13T10:24:58+03:00

A fair value option is the alternative for a business to record its financial instruments at the fair values. Liabilities are company's financial debts or obligations that arise in the course of business operations. They may be long term or short term. In this case, if the fair value of the liability decreases, the firm should respond by crediting the unrealized Holding Gain/loss in the income account.