Balance sheet - Are stocks owned reported at cost or market value??

I always thought public companies had to report equity investments owned at the lower of cost or market. And what does fair market value mean?

FMV is the price the stock can be bought & sold for in the open market. And yes, you are correct on the lower of cost or market presentation.

The lower of the two is what is required on the balance sheet, but they will use other ways to show the difference, depending on what type of assets are being held that appreciated.

Typically, the notes of the balance sheet will show the actual value of the assets (Stocks, Bonds, Corporate Paper, etc) and include an adjustment amount that you can add to the net worth of the company to get a more reliable financial picture.

The CPAs that put these notes in will (Should) be very forthcoming that this is only a potential increase in net worth, not an actual increase.

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