Financial assets include stocks and bonds. These are fairly simple securities that can often be valued using quoted market prices. However, there are more complex financial instruments that do not have quoted market prices. These complex securities must still be valued on the balance sheet at fair value. Generally accepted accounting principles require that the reporting entity use assumptions in valuing investments when market prices or critical valuation inputs are unobservable.

What are the ethical considerations in making subjective valuations of these complex financial instruments?

Our Question for the week is one of ethics. You will need to go back in the text a bit in order to include information about GAAP concerning valuation, but the second half of the DB is subjective to your views of what the book suggests.