What is the objective of fair value accounting?
The objective of fair value accounting is to arrive at a price for an asset which would be struck between market participants. The argument is that for some assets and liabilities fair value offers more useful information than alternative ways of valuing assets, for example using a previous sale price when the sale took place some time in the past. An example of an instance in which fair value accounting would be used is in an investment properties business. If there are no current prices in an active market for similar properties, fair value is one way to determine a price for the asset. The business would rely on the changes to the fair value of investment properties as the basis for its distributions to shareholders. This is why fair value accounting is important. It still allows the business to put a value on its investment properties or any other asset, when the current market price is not from an active market. What role has fair value accounting played in the global financial do
Related Questions
- FASB has announced it will make changes to the fair value accounting standards in the next few weeks. Why didnt NCUA wait to see if those changes may have impacted the financial position of these corporate credit unions?
- What is a realistic timeframe for the implementation of fair value accounting or Solvency II?
- What is the objective of fair value accounting?
