How should ABC Corporation account for its investment in XYZ Corporation at the end of the month?

When accounting for an investment in another corporation, it is important to consider the nature of the investment and the applicable accounting standards, such as IFRS or GAAP. In this scenario, the option related to fair market value (FMV) with gains and losses included in other comprehensive income is appropriate because it aligns with how certain types of investments, particularly those classified as available-for-sale securities, are treated.

When an investment is classified as available-for-sale, changes in market value do not directly affect net income but are instead reported in other comprehensive income until the investment is sold. This treatment reflects the intention that the investment may not be realized in the short term, thereby separating unrealized gains or losses from operating performance.

Choosing to record the investment at historical cost would not provide an accurate representation of the current financial conditions as it ignores market fluctuations, while recognizing a full market value loss directly in income may not be suitable until the investment is disposed of. Not adjusting the value entirely fails to recognize the ongoing changes in market conditions that could impact the financial statements.

In summary, reflecting the fair market value adjustments in other comprehensive income allows ABC Corporation to present a more comprehensive view of its financial position, considering the fluctuations in the investment's value while protecting the main income