This website uses cookies to ensure you have the best experience. Learn more

Fair Value Essay

660 words - 3 pages

FAS 157 defined the fair value of an asset as the price that would be received by the holder of that asset in an orderly transaction. On September 30, 2008, SEC and FASB issued a joint clarification which stressed that fair market value is not the price that would be received in distressed sale or forced liquidation. They also provide guidance that estimates of fair value can be made using the expected cash flow of such assets, provided the estimates has also reflects the adjustment of a willing buyer in the risk of default. This concept created transparency on the value of the assets which was easily confirmed by the auditors and users of the financial statements. However, during the ...view middle of the document...

On April 9, 2009, FASB further issued an official update to FAS 157 which eases mark to market rules when market is unsteady or inactive.
The leeway and the official update of FAS 157 have created controversy among the pro and contra opponents of fair value accounting. Many bankers have pointed out the use of ‘mark to market’ in distressed market lead to unreasonable write down of their financial assets. Robert Rubin , the former citigroup senior counselor was quoted saying that the rule has done “a great deal of damage”. William Isaac, former chairman of FDIC, has called fair value as the ‘major cause’ of the credit crisis. Spencer Bachus, the ranking republican on the house financial services committee pointed out the rigid application of fair value accounting had caused further instability in the banking system. The proponent of fair value accounting argued the notion that fair value accounting is the cause of the crisis. Arthur Levitt , former SEC chairman, pointed out...

Other Papers Like Fair Value

Fair Value Accounting and the Gfc

1821 words - 8 pages Introduction With the Global Financial Crisis came the search for answers as to what led to the meltdown in the United States mortgage market and ultimately the rest of the world economy. Speculation was rife that accounting standards, in particular, fair value accounting was the prime reason for this significant meltdown. “This sparked a fierce debate with some experts believing that fair value accounting was primary cause of the crisis

Benefits and Challenges..Fair Value Accounting Essay

2543 words - 11 pages | BENEFITS AND CHALLENGES OF FAIR VALUE ACCOUNTING | ACCT 525-22936 Current Issues in Accounting | Professor Kabani | Robert Larison | 10/20/2013 | In this paper I look at the benefits and challenges that are likely to follow the migration into the use of Fair Value Accounting. Perhaps, there is no issue today that carries with it as much controversy as does “FVA”. | BENEFITS AND CHALLENGES OF FAIR VALUE ACCOUNTING

Alternative Fair Value

1205 words - 5 pages Accounting regulation The Learning Objectives for this lecture: Regulatory framework Role of a conceptual framework Current state of play of conceptual framework for international standards Different approaches to accounting regulation •Free-market approach EMH Agency theory •Regulatory approach market mechanisms will not be able to achieve a socially optimal equilibrium price for accounting information Theory of efficient

Analysis of Biological Assets Valuation Method with Fair Value Accounting and Historical Cost Accounting in Plantation Subsector of Indonesian Agricultural Industry in the Period of 2007-2012

3556 words - 15 pages ANALYSIS OF BIOLOGICAL ASSETS VALUATION WITH FAIR VALUE ACCOUNTING AND HISTORICAL COST ACCOUNTING METHOD IN PLANTATION SUBSECTOR OF INDONESIAN AGRICULTURAL INDUSTRY IN THE PERIOD OF 2007-2012 Karina Putri Ramadhani1 and Indra Pratama2 1 Thesis Writer, Swiss German University 2 Thesis Advisor, Swiss German University Abstract The analysis of biological assets valuation with fair value accounting and historical cost accounting method in


1727 words - 7 pages corporation. Over the useful life of the asset, it is necessary to periodically test for impairment. Impairment exists when the carrying value of a long-lived asset exceeds the fair value of the asset and is not recoverable. Various events and changes in circumstances can lead to an impairment, they include but are not limited to; a decrease in fair value of an asset, a change in the manner the asset is used, adverse changes in legal factors or the

Express Dry-Cleaning

526 words - 3 pages ) of this reporting unit are $4,000,000, which includes intangible assets of $2,200,000, a trademark of $400,000, and goodwill of $1,400,000. The fair value of the reporting unit is considered to be $3,400,000, which includes tangible assets of $2,200,000, the trademark valued at $300,000, and internally developed, unrecognizable intangible patent valued at $100,000. Express expects the division to generate profits in years to follow. Issues 1

Galaxy Accounting Memo

774 words - 4 pages -20-35-30 mandates a goodwill impairment test between annual tests3. Therefore, an impairment test shall be carried out as of Sep 30, 2010. Figure 1 I also tracked the changes in control premium to gauge the accuracy of the fair value estimates assuming the 2009 fair values were carried forward. Control premium is the portion of fair value in excess of market capitalization. Control premium represents the added value that comes from


1782 words - 8 pages these assets would be better accounted for under IAS 16 Property, Plant and Equipment rather than using the fair value measurement approach prescribed by IAS 41. There is support (especially those in the plantation industry) for a limited-scope project for BBAs and such a project is also supported in the Issues Paper produced by the Asian-Oceanian Standard Setters Group (AOSSG) and the IASB's Emerging Economies Group (EEG). Users of financial


384 words - 2 pages Anna Lewis Advanced Accounting Seminar II DQs Chapter 2: 8 First Morgan Company will find the fair value of Jennings, Inc and the fair value of the stock shares. The excess if recorded as goodwill. Because dissolution will occur, Jennings’ asset and liability accounts are transferred to Morgan and entered at fair value with excess recorded to goodwill (Doupnik, Hoyle & Schaefer, 2011). Chapter 2:9 A bargain purchase gain will be

Financial Assessments

1266 words - 6 pages financial statements on February 28, 2011. The purpose of this report is to examine the differences in numbers, and disclosures concerning the reporting of items under IAS 39, between and within the two companies, for 2009 and 2010. Further, this report will examine the controversies which have led to the establishment of IAS 39 fair market value procedures, and will investigate the differences between the reporting under IAS 39 (Fair value

Sooner or Later

1045 words - 5 pages Should Sooner or Later use the $6 grant-date fair value or the $9 grant-date fair value to measure its compensation cost? Codification 718-10-30-6 states the measurement objective for equity instruments awarded to employees is to estimate the fair value at the grant date of the equity instruments that the entity is obligated to issue when employees have rendered the requisite service and satisfied any other conditions necessary to earn the

Related Essays

Fair Value Measurement Essay

898 words - 4 pages A. The prospective criticism of Fair Value Measurement 1. Analysis of nature of Fair Value Measurement The implement basis of SFAS157 is in an efficient market. Its hierarchy of fair value measurement confirms the priority of market price for the same or similar position. But under the credit crisis, entity will expect to reverse the unrealized losses partially at present or totally in the future. Based on this assumption, some entities

Fair Value Accounting Tiers Essay

915 words - 4 pages . Unobservable Input – shall be used to measure fair value to the extent that relevant observable inputs are not available, thereby allowing for situations in which there is little, if any market activity for the asset or liability at the measurement date.

Pfrs Financial Asset At Fair Value

1297 words - 6 pages Chapter 22: Financial Asset at Fair Value International Accounting Standards Board Investments are assets held by an entity for the accretion of wealth through distribution such as interest, royalties, dividends, and rentals, for capital appreciation or for other benefits to the investing entity such as those obtained in trading relationship s. PAS 32, paragraph 11 Financial instrument, any contract that gives rise to a financial asset of

Subprime Crisis And Fair Value Accounting

940 words - 4 pages SUBPRIME CRISIS AND FAIR VALUE ACCOUNTING 1. Fair-value accounting is defined by FAS 157 as "a price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date". It is also called mark-to-market accounting when market prices are used to determine fair value. Critics have blamed this method of accounting to be 70% responsible for the subprime crisis