Unformatted text preview: ption. Companies now have the “option” of using fair value as the basis of measurement in financial statements (by way of an unrealized holding G/L account which gets adjusted at the end of EACH AND EVERY reporting period thereafter (similar to valuation of TS and AFS securities.) LO 7 Explain accounting issues related to valuation of notes receivable. Valuation of Notes Receivable
Valuation of Notes Receivable
Illustration (recording fair value option): Assume Escobar Company has N/R that have a fair value of $810,000 and a carrying amount (NRV) of $620,000. Escobar decides on December 31, 2010, to use the fair value option for these receivables. This is the first valuation of these recently acquired receivables (option MUST occur at this time). At December 31, 2010, Escobar makes an AJE to record the increase in value of N/R and to record the unrealized holding gain, as follows. Notes Receivable 190,000 Unrealized Holding Gain or Loss—Income (I/S) 190,000
7-52 LO 7 Explain accounting issues related to valuation of notes r...
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