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why do marketable securities represent a departure from objectivity principle instead of cost principle?

Asked by: mai 600 days ago - 1 Answers - 1371 views

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Marketable securities are volatile by nature – their value is in constant flux. Applying the objectivity principle when compiling annual reports and financial statements is still possible, but the information will be wrong two seconds later, will cause wild swings in financial figures from period to period. Also, market information is more easily available than it used to be, so keep that in mind.

Generally, though, security investments should be excluded from any investment analysis of company performance for the very reason it’s unverifiable and unpredictable.

The cost principle is simply easier to account for. It stays constant until securities are sold, then the value will be accounted for accordingly. I hope this helps paint the picture clearly.

Answer by Rick 600 days ago

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