Choice "C" is correct. The risk tolerance of management is not defined by SFAC #7 as an element of present value measurement used to establish the value of assets or liabilities using cash flows. SFAC defines the following elements of present value measurement identified by the mnemonic UVOTE:
U | The Price for Bearing Uncertainty. |
V | Expectations about Timing Variations of Future Cash Flows. |
O | Other Factors (e.g., Liquidity Issues and Market Imperfections). |
T | Time Value of Money (the Risk-free Rate of Interest). |
E | Estimate of Future Cash Flow. |
Choices "b", "a", and "d" are incorrect. All three choices are named as elements of present value measurement in the UVOTE mnemonic.
