Asked by Kylie Gravel on May 14, 2024
Verified
Current GAAP requires a company to disclose the fair value of its financial instruments and to disclose all significant concentrations of credit risk due to its financial instruments.The FASB's rationale for this disclosure includes allowing readers to
A) better identify major customers
B) compute each company's risk
C) better determine a company's financial flexibility
D) compute liquidity ratios
GAAP
Generally Accepted Accounting Principles, which are a set of accounting standards and practices used to prepare financial statements.
Financial Instruments
Contracts that give rise to both a financial asset of one entity and a financial liability or equity instrument of another entity.
- Recognize the importance and methods of internal control over cash to prevent and detect errors and fraud.
Verified Answer
KG
Kimberly GarciaMay 21, 2024
Final Answer :
C
Explanation :
The FASB's rationale for requiring companies to disclose the fair value of their financial instruments and all significant concentrations of credit risk is to allow readers to better determine a company's financial flexibility. This information helps in assessing how well a company can react to financial difficulties or opportunities, by understanding its exposure to risk and the value of its financial instruments.
Learning Objectives
- Recognize the importance and methods of internal control over cash to prevent and detect errors and fraud.
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