Is Fair Value Accounting Really Fair - 1021 Words

For our project, we wanted to pick the topic, â€Å"Is fair value accounting really fair?† The first part of our presentation was simply explaining what fair value accounting is. This is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transactions. According to the Financial Accounting Standards Board, the price that would be received to sell an asset or price to transfer a liability in an orderly transaction between market participants at the measurement date is the idea behind Fair Value accounting. FASB came up with SFAS 157 to improve this accounting principle. Some of their objectives were to â€Å"provide a framework for fair value measurements, change the definition of fair value, elaborate on the concept of market participants.† In our presentation, we want to discuss how fair value accounting affects society in businesses. One example of how this effected society as a whole was the 2008 financial crisis. In this financial crisis, many companies were impacted but in particular AID insurance company faced a 11 billion dollar write down of debt before FASB introduced their new guidelines of SFAS 157. If this happened after these guidelines were passed, this company would have had a loss more like 900 million dollars. As a result, a company with trillion dollars of assets reported unrealized losses of tens of billions. Another area that was impacted was the American BankingShow MoreRelatedInternational Accounting Standards Codification System1414 Words   |  6 PagesIn 2006, the FASB issued Statement No. 157, â€Å"Fair Value Measurements† (SFAS 157), and in 2007 issued Statement No. 159. The objective of SFAS 157 is to increase the consistency, comparability and transparency of fair value measurements used in financial reporting by establishing â€Å"a single authoritative definition of fair value, a framework for measuring fair value, and fair value financial statement disclosure requirements†(http://www.iasplus.com/en/binary/usa/0808fairvalueupdate.pdf). In 2011,Read MoreDefining Fair Value Essay1280 Words   |  6 PagesRevalued amount is fair value at date of revaluation less subsequent accumulated depreciation and impairment losses (Touche, 2009). Canadian and U.S. GAAP use historical cost as the basis of measurement for property, plant and equipment (Touche, 2009). Revaluations are prohibited in both Canadian and U.S. GAAP (Touche, 2009). So what does that mean for companies not sure of what to choose or needs guidance? Even when a particular IFRS lacks guidance, the application of the IAS 8 Accounting Policies, ChangesRead MoreAccounting Research: Advantages of Cash Flow1720 Words   |  7 Pagesdependent on accounting conventions and concepts/principles * Cash flow reporting satisfies the needs of all users better since cash flow is more direct with its messages. Some of the interested user parties are: * Creditors   -repayment of debts, overdue accounts * Management -cash flow reporting provides the type of information which decision should be taken re: relevant costs ( decision based on future cash flow) * Shareholders amp; Auditors -cash flow accounting and reportingRead MoreClient Understanding Paper1223 Words   |  5 PagesTilley Running head: CLIENT UNDERSTANDING PAPER 1 CLIENT UNDERSTANDING PAPER 2 Client Understanding Paper In the course of normal business operations certain transactions require specific treatment in accordance with generally accepted accounting procedures (GAAP). To properly prepare financial statements, the analysis of working papers is imperative to insuring compliance. Clarification of why information is needed about adjusting lower cost of market inventory on valuation, capitalizingRead MoreChanges in treatment of goodwill due to IFRS 31152 Words   |  5 Pages Changes in treatment of goodwill due to IFRS 3 Paper On 19th November 2013 at the Berlin School of Economics and Law Study programme: Accounting and Controlling Matriculation year: 2013 Matriculation number: 412410 Semester: Winter semester Table of contents 1. Introduction†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 2 2. Prior treatment of goodwill†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 2 2.1 Goodwill amortization†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦... 3 3. Goodwill after adoption of IFRS 3†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Read MoreIFRS TO GAAP Essay815 Words   |  4 Pageseven harder. IFRS 8-1: What are some steps taken by both the FASB and IASB to move to fair value measurement for financial instruments? In what ways have some of the approaches differed? The fair value measurements does provide the users who have the financial statements with correct picture of the value of the company’s assets. The IFRS and GAAP, demand firms to include information that is essential to fair value measurement practices in the notes of financial statements. It does not matter whichRead MoreEssay on Comparing Gaap to Ifrs787 Words   |  4 PagesIFRS 8-1: What are some steps taken by both the FASB and IASB to move to fair value measurement for financial instruments? In what ways have some of the approaches differed? Fair value measurements have the power to provide users of financial statements with an accurate depiction of the value of the company’s assets. IFRS and GAAP are strict in the fact that they require the firms to include information regarding fair value measurement practices in the notes of financial statements. When followingRead MoreDiscuss the Difficulties Relating to the Recognition and Measurement of Intangibles Generally and of Brands in Particular.1236 Words   |  5 Pagesdiscussion. According to IAS 38, an intangible asset defines as â€Å"an identifiable, non-monetary asset without physical substance† including brand, computer software, patents and copyrights. As this typical asset has no physical substance, it is really difficult to recognize and measure it. This essay mainly aims to explain the difficulties to recognize and measure generally intangible assets especially the brand and some analyze refer to the Enigma example will be shown. An item cannot be anRead MoreEnron And The Enron Scandal1387 Words   |  6 Pagesthen formed into energy, commodities, and service company. Lay then hired Jeff Skilling as CEO; it was these two and a few other high-ranking executives that led to the failure of Enron. In short, Enron was losing money, but with the work of fancy accounting and taking advantage of free enterprise, reported huge false profits. This all came to a head in 2001 when Enron declared bankruptcy. From the employees perspective. When looking at the employees’ point of view on the scandal, we first start withRead MorePresentation Of A Presentation On The Presentation1001 Words   |  5 Pagesin to the conclusion. My first part in the presentation was to speak and provide information about our topic i.e. measurement, and mixed measurement approach that are commonly used in accounting, which are historical cost, current cost/replacement cost, fair value/realisable value, present value and deprival value (rarely applied). For the successful presentation, it is very important to clearly provide brief introduction to the topic/content to the audiences, as without the detailed introduction