Contents
1. Fair Value Accounting: An Introduction………………………………………………3- 2. Fair Value Model of Accounting………………………………………………………4
- 3. Arguments In Favor of Fair Value Accounting: Tangible Assets……………………..5
- 4. Criticism of Fair Value Accounting: Assets……………………………………………6
- 5. Fair Value Accounting Hurts Investors……………………..………………………….7
- 6. Fair Value Accounting: Intangibles, Goodwill & Impairment…………………………8
- 7. Fair Value Accounting Add Relevancy & Reliability………………………………...10
- 8. CPA on Fair Value Accounting……………………………………………………….11
- 9. Conclusion…………………………………………………………………………….11
- 10. References…………………………………………………………………...……….13
Description
Among the traditional methods of accounting the financial instruments, fair value accounting has been widely used by organizations. Under this method of accounting, the assets and other financial instruments used for trading purpose are calculated on marked to market basis. The majority of financial instruments are recorded at the market value which is against the traditional method of historical cost accounting. Any method used for accounting is indeed of valuable importance as large part and a lion’s share of the financial statements of any company comprises of financial instruments. The records show that in the last couple of years various steps have been taken by the national and international government to take this method of accounting to a wider range which will cover all assets and liabilities of a company.
The paper reviews the concept and application of fair value accounting and particularly to its widespread application to company’s financial instruments. The paper also looks at practical applicability of fair value accounting in particular to financial instruments. The first part of the report goes on to tell the advantages and drawbacks from this tool of accounting when used to measure financial instruments. The second part of the report analyzes fair value accounting and its application to Australian market. Finally, the paper rounds off with a conclusion.
