When planning to sell equity securities, what is the appropriate valuation approach?

The appropriate valuation approach for equity securities when planning to sell them is fair value. This method reflects the current market price of the equity securities, which is essential for making informed decisions about their sale. Fair value recognizes that the worth of securities can fluctuate based on market demand, supply, and other economic factors. This approach provides a realistic assessment of how much these securities could potentially yield if they are sold at that moment.

Using fair value is particularly important for investors and companies because it helps them understand the potential gains or losses they may incur upon selling their equity securities. This valuation aligns with the principle that financial statements should provide relevant and useful information to users, ensuring transparency and accuracy in reporting the value of investments.

In contrast, amortized cost is more suitable for certain debt securities and fixed income instruments where historical cost and amortization are applicable. Net asset value typically applies to mutual funds and is calculated based on total assets minus total liabilities rather than individual securities. Book value represents the value of an asset as recorded on the balance sheet, which may not accurately reflect its current market value, especially in a volatile market.

Therefore, using fair value gives a more precise picture of what equity securities could actually be sold for, making it the most suitable approach in this context