With the stock market being so volatile in recent months, does it still make sense to follow the lower of cost or market rule for short-term marketable securities?
Although there might be changes in the stock market on any given day that exceeds say 1% of a stock portfolio, these changes tend to even out even on the short run, say within a week. Whenever there are more significant, and more permanent changes, these changes become clearer indications concerning the realizable values of the stocks available to be traded. Management has classified the marketable securities as current, it intends to be able to convert these assets to cash within a very short period of time. Therefore, the intent of the lower of cost or market rule, which is to conservatively report the asset at its realizable value is being properly served. Question 2 – Long-Term Investments: Big company has significant influence over another company, we will call Small and appropriately, over the years has accounted for the investment using the equity method. Let s say that in a particular year, Small experiences an unusual, maybe even extraordinary loss that causes the investment a
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