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Basic Question 0 of 24
How to record an "available-for-sale" investment on the balance sheet?
B. At either purchase price plus any acquisition costs or current market value, whichever is higher
C. At either purchase price plus any acquisition costs or current market value, whichever is lower
A. At its fair market value
B. At either purchase price plus any acquisition costs or current market value, whichever is higher
C. At either purchase price plus any acquisition costs or current market value, whichever is lower
User Contributed Comments 4
| User | Comment |
|---|---|
| Alfa1 | I though we should use the lower of cost or market method here? |
| kalps | Alfa, that is for INVENTORY not investments. Short term investments are priced at their fair market value i.e marked to market. Stock for resale i.e. that used in the business to generate economic profit is valued at lower of cost and net realisable value (market/replacement cost) |
| johnowens | its right there in the section of the notes for available for sale securities. treat them the same as Trading securities except for the treatment of unrealized gain/loss. |
| ascruggs92 | Lower of cost or market is for Non financial assets, meaning something that you are not buying with the intention of trading for a profit or generating interest income. An example is PP&E. You don't buy a factory with the intent of reselling at a higher value down the road, you buy it so your company can make its product. |
I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
explain why effective duration and effective convexity are the most appropriate measures of interest rate risk for bonds with embedded options
calculate the percentage price change of a bond for a specified change in benchmark yield, given the bond's effective duration and convexity
CFA® 2025 Level I Curriculum, Volume 4, Module 13.