The Fair Value Adjustment account Answer A) is set up for each security in the c

Question

The Fair Value Adjustment account

Answer

A) is set up for each security in the company’s portfolio.

B) relates to the entire portfolio of securities held by the company.

C) is closed at the end of each accounting period.

D) appears on the income statement as Other Expenses and Losses.

A) is set up for each security in the company’s portfolio.

B) relates to the entire portfolio of securities held by the company.

C) is closed at the end of each accounting period.

D) appears on the income statement as Other Expenses and Losses.

Explanation / Answer

Answer is option B. It relates to the entire portfolio of securities held by the company.

In case of investments valued on cost basis, should be adjusted to value at the end of accouting period and fair value adjustment account is used for this purpose. In case it is a gain, then Fair vaue adjustment account is debited and if it is a loss the account is credited and is reported on the balance sheet.

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