An investment company has securities as current assets having market value substantially lower than the cost price. The company continues to show them at cost. Is the concept of Prudence being followed? Why?
Dear Student,
When investment has market value substantially lower than the cost price then the company needs to show the lower value in order to follow the concept of prudence;
This is because a substantial lower price than market might have a negative impact on company's liquidity and the stakeholders should be aware of that;
Regards,
When investment has market value substantially lower than the cost price then the company needs to show the lower value in order to follow the concept of prudence;
This is because a substantial lower price than market might have a negative impact on company's liquidity and the stakeholders should be aware of that;
Regards,