A company relies on quoted market prices to determine the fair value of investme

Question

A company relies on quoted market prices to determine the fair value of investments securities reported in its balance sheet, rather than employing valuation consultants for this purpose.

Provide the letter corresponding to the SINGLE, PRIMARY assumption, principle, or qualitative characteristic that corresponds with the above statement

A. Periodicity assumption

B. Monetary unit assumption

C. Going concern assumption

D. Economic entity assumption

E. Full disclosure principle

F. Revenue recognition principle

G. Historical cost principle

H. Matching principle

I. Representational faithfulness

J. Comparability (incl. Consistency)

K. Relevance

L. Materiality

M. Conservatism

Explanation / Answer

The answer is “I” – representational faithfulness.

Representational faithfulness means that the accounting information should have the ability to faithfully represent the transactions and events that have occurred and taken place during a given period.

Use of a valuation consultant may lead to errors or biases.

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