Fair Value Accounting Essay Example | Topics and Well Written Essays - 1500 words

Fair Value Accounting - Essay Example(Parshall, 2009)This study is set out to hash out somewhat evaluate accounting and more specifically determine its role in the credit crisis that rocked the human in 2008. It will try to justify the statement that, Fair take to be accounting only deeds in efficient, active and liquid marts. In order to produce information which is relevant and reliable, fair value focuses on market prices.Due to the financial crisis, fair-value approach for accounting has triggered major debates globally. Among the debaters are the European Commission, the States Congress as well as accounting and banking regulators in the globe. Cynics have it that the financial crisis impacting the whole serviceman in the recent past has been mostly caused by the effects of fair-value accounting. The study is going to determine whether fair value accounting is only applicable in active, efficient and liquid markets. Various arguments will be considered while trying to dra w the befitting approach to the issue.The Standards of accounting reports, IFRS and US GAAP, aid in filiation from market prices in various circumstances. However, it is not very clear whether these standards are the origin of the predicaments. The allowing of the managements of organisations to be conciliative when it comes to dealing with future value accounting problems leads to the manipulation during such times as those of financial crisis. From the stance thus the market conditions may impact on fair value accounting.However, according to Laux and Leuz, future value accounting is an approach to the measurement of liabilities and additions in a given companys balance sheet. FASs number 157 definition is that fair value accounting is the 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. Under IFRS fair value has been defined as the sum at which a certain asset and liabili ty could be