What is Fair Value Accounting?
Fair Value Accounting is an accounting standard that requires companies to measure and report their assets and liabilities at their current market value. In other words, it reflects 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.
The application of fair value accounting requires careful consideration of market conditions and diligent adherence to accounting standards and best practices. It’s important to note that fair value accounting is not without its criticisms. Some argue that it can exacerbate market swings and lead to potential over-valuation or under-valuation of assets and liabilities.
Table of Content
- Principles of Fair Value Accounting
- How to Determine Fair Value?
- Application of Fair Value Accounting in Volatile Markets
- Advantages of Fair Value Accounting
- Disadvantages of Fair Value Accounting