Financial assets include stocks and bonds.These are fairly simple securities thatcanoften be valued using quoted marketprices. However, there are more complexfinancialinstruments that do not have quotedmarket prices. These complex securities muststill bevalued on the balance sheet at fairvalue. Generally accepted accountingprinciples requirethat the reporting entity useassumptions in valuing investments whenmarket prices or critical valuationinputs areunobservable.What are the ethical considerations in makingsubjective valuations of these complexfinancialinstruments?

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What are the ethical considerations in making subjective valuations of these complex financialinstruments?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Financial assets include stocks and bonds.
These are fairly simple securities that
canoften be valued using quoted market
prices. However, there are more complex
financialinstruments that do not have quoted
market prices. These complex securities must
still bevalued on the balance sheet at fair
value. Generally accepted accounting
principles requirethat the reporting entity use
assumptions in valuing investments when
market prices or critical valuationinputs are
unobservable.
What are the ethical considerations in making
subjective valuations of these complex
financialinstruments?

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