Measuring Equity Securities without Readily Determinable Fair Values

by | Jun 27, 2024 | business

 

Equity securities may not always have a readily determinable fair value.How are equity securities measured if fair values are not readily determinable?Give real-world examples where appropriate.

 

Sample solution

Dante Alighieri played a critical role in the literature world through his poem Divine Comedy that was written in the 14th century. The poem contains Inferno, Purgatorio, and Paradiso. The Inferno is a description of the nine circles of torment that are found on the earth. It depicts the realms of the people that have gone against the spiritual values and who, instead, have chosen bestial appetite, violence, or fraud and malice. The nine circles of hell are limbo, lust, gluttony, greed and wrath. Others are heresy, violence, fraud, and treachery. The purpose of this paper is to examine the Dante’s Inferno in the perspective of its portrayal of God’s image and the justification of hell. 

In this epic poem, God is portrayed as a super being guilty of multiple weaknesses including being egotistic, unjust, and hypocritical. Dante, in this poem, depicts God as being more human than divine by challenging God’s omnipotence. Additionally, the manner in which Dante describes Hell is in full contradiction to the morals of God as written in the Bible. When god arranges Hell to flatter Himself, He commits egotism, a sin that is common among human beings (Cheney, 2016). The weakness is depicted in Limbo and on the Gate of Hell where, for instance, God sends those who do not worship Him to Hell. This implies that failure to worship Him is a sin.


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God is also depicted as lacking justice in His actions thus removing the godly image. The injustice is portrayed by the manner in which the sodomites and opportunists are treated. The opportunists are subjected to banner chasing in their lives after death followed by being stung by insects and maggots. They are known to having done neither good nor bad during their lifetimes and, therefore, justice could have demanded that they be granted a neutral punishment having lived a neutral life. The sodomites are also punished unfairly by God when Brunetto Lattini is condemned to hell despite being a good leader (Babor, T. F., McGovern, T., & Robaina, K. (2017). While he commited sodomy, God chooses to ignore all the other good deeds that Brunetto did.

Finally, God is also portrayed as being hypocritical in His actions, a sin that further diminishes His godliness and makes Him more human. A case in point is when God condemns the sin of egotism and goes ahead to commit it repeatedly. Proverbs 29:23 states that “arrogance will bring your downfall, but if you are humble, you will be respected.” When Slattery condemns Dante’s human state as being weak, doubtful, and limited, he is proving God’s hypocrisy because He is also human (Verdicchio, 2015). The actions of God in Hell as portrayed by Dante are inconsistent with the Biblical literature. Both Dante and God are prone to making mistakes, something common among human beings thus making God more human.

To wrap it up, Dante portrays God is more human since He commits the same sins that humans commit: egotism, hypocrisy, and injustice. Hell is justified as being a destination for victims of the mistakes committed by God. The Hell is presented as being a totally different place as compared to what is written about it in the Bible. As a result, reading through the text gives an image of God who is prone to the very mistakes common to humans thus ripping Him off His lofty status of divine and, instead, making Him a mere human. Whether or not Dante did it intentionally is subject to debate but one thing is clear in the poem: the misconstrued notion of God is revealed to future generations.

 

References

Babor, T. F., McGovern, T., & Robaina, K. (2017). Dante’s inferno: Seven deadly sins in scientific publishing and how to avoid them. Addiction Science: A Guide for the Perplexed, 267.

Cheney, L. D. G. (2016). Illustrations for Dante’s Inferno: A Comparative Study of Sandro Botticelli, Giovanni Stradano, and Federico Zuccaro. Cultural and Religious Studies, 4(8), 487.

Verdicchio, M. (2015). Irony and Desire in Dante’s” Inferno” 27. Italica, 285-297.

Sample Answer

Sample Answer

Measuring Equity Securities without Readily Determinable Fair Values
Introduction
Equity securities are a vital component of investment portfolios, providing investors with ownership stakes in companies. While fair values of equity securities are typically determined through market prices, there are instances where these values are not readily ascertainable. In such cases, alternative methods must be employed to measure the value of equity securities, ensuring accurate financial reporting and decision-making.
Thesis Statement
When fair values of equity securities are not readily determinable, accounting standards provide guidelines for measuring these investments using methods such as cost, observable market prices of similar securities, or discounted cash flow models. Real-world examples further illustrate how companies navigate the valuation of equity securities in the absence of readily determinable fair values.
Methods for Measuring Equity Securities
1. Cost Method: Under the cost method, equity securities are initially recorded at their acquisition cost. Subsequent adjustments are made only if there are observable impairments in the value of the securities.
2. Market Price of Similar Securities: When market prices for specific equity securities are unavailable, companies may look to the prices of similar securities that are actively traded in the market as a reference point for valuation.
3. Discounted Cash Flow (DCF) Models: DCF models estimate the present value of expected future cash flows generated by the equity securities. This method requires projections of future cash flows and an appropriate discount rate.
Real-World Examples
1. Start-up Investments: Companies often invest in start-up ventures where there is limited market activity for similar securities. In such cases, they may use the cost method initially and reassess the valuation periodically based on the performance of the start-up.
2. Private Equity: Private equity investments may lack active markets for valuation. Private equity firms often use sophisticated valuation techniques like DCF models to estimate the fair value of their investments.
3. Illiquid Securities: Investments in illiquid securities, such as certain types of preferred stocks, may require unique valuation approaches. Companies may engage third-party valuation specialists to determine the fair value in such instances.
Conclusion
Measuring equity securities without readily determinable fair values necessitates the application of alternative valuation methods to ensure accurate financial reporting and decision-making. By utilizing approaches such as the cost method, market price comparisons, or DCF models, companies can navigate the complexities of valuing investments in various market conditions. Real-world examples demonstrate how organizations adapt these methods to assess the value of equity securities in diverse investment scenarios, highlighting the importance of robust valuation practices in financial management.

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