Answered

Which of the following is not a true statement regarding the fair value accounting option?

A. The fair value option converges U.S. GAAP and IFRS by having an identical standard.
B. The fair value option reduces the need to comply with complex hedge accounting guidance.
C. The fair value option increases earning volatility.
D. The fair value option mutes earnings volatility.



Answer :

GinnyAnswer

Final answer:

The fair value accounting option allows assets and liabilities to be measured at fair value, impacting earning volatility.


Explanation:

The fair value accounting option is an accounting choice that allows companies to measure and report financial assets and liabilities at their fair value, with changes in fair value recognized in the financial statements.

One of the statements provided is not true: The statement 'The fair value option mutes earnings volatility' is not accurate. In reality, the fair value option increases earning volatility as it reflects changes in asset and liability values in the financial statements.

Therefore, the correct answer to the question is that the fair value option increases earning volatility.


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