Fair Value Accounting Essay Example for Free

carnival Value Accounting EssayThis base attempts to answer the header Is it conjectural to blame uncontaminating prize bill for whatsoever of the Wall Street mess? This paper in effect settle whether the use of passably abide by accounting by listed companies in the study stock modifys in the US, particularly those found in Wall Street, which the grammatical cased fall in prices of the stocks of these companies, was required of companies without justification hence, it should be blamed for the mess. 2. Analysis and DiscussionAny mess in the Wall Street is delineate for this paper as one and only(a) causing the stock prices of companies list in major stock exchanges of the US to fall and that it resulted to losses to investors. To maintain reasonable basis to blame decent note value accounting for any Wall Street mess, does non simply mean that fair value accounting was the necessary cause of fall in the prices of corporate stocks but that the requirement of fair value accounting must non be fair. The question that must be decided on that pointfore is whether fair value accounting is fair as basis of valuing corporate assets, liabilities and equity.A situation or condition is fair if it gives what is due to a person. If the concept of fair value is used in the context of an asset purchased or liability fake in business, fair value implies that said asset or liability must neither be overpriced nor underpriced whether perceived or otherwise. The law of economics would have fair value as one representing that market price or that equilibrium price of a product or service (Samuelson and Nordhaus, 1992) which is excessively the value of something from a seller that is not forced to sell or from a buyer that is not forced to buy.Investors, creditors, and other persons expect to be treated fairly as they enter into motions in terms of value that they will give in exchange to what they will receive. To illustrate, a person or company pla nning to invest in stocks will appreciate what is fair if the said person or company will earn sufficient return above exist of capital in exchange for the risks macrocosm faced by such person or company (Brigham, 2002).To have what is fair, the investors must accredit the accurate and current training about of the company to guide them about their chances of gaining or losing money. These users deserve to have the opportunity to have the true or accurate value of asset, liability or equity being dealt with in a business transaction as basis for valuing the stocks that they will invest with. Financial reports hustling companies, as guided by Financial Accounting Standards Board (FASB) accounting standard under fair value accounting, will provide these users the opportunity.Specifically, fair value accounting was made pursuant to FAS 157 as issued by US FASB for companies to reflect the accounting development on the real values of assets, liabilities and equity in the ratio s heet as contrasted with presenting the information using the historic cost accounting (Meigs and Meigs, 1995). A group of analysts and portfolio managers very formed part of those who influenced the passage of the fair value accounting for more relevant information in decision making (Chasan, 2008).Under FAS 157 defines fair value is defined as the price that would be current to sell an asset or paid to transfer a liability in an orderly transaction between market participants in a measurement date (Sortur, 2007). If companies have restated their pecuniary statements from historical cost accounting to fair value accounting, the purpose was laudable since in simple terms, the intention is to make the information more relevant, more accurate and more reliable for decision makers.If stockholders got affected in terms of set out price of stocks as a result of restatement of financial statements, the error was when they were made the purchase of their investments under the historical cost accounting. Since fair value accounting may also increase the value of the stocks if fair value is higher than cost, it could not be asserted that it should be blamed for the fall of prices but not praised for increase in price increase of stock prices. 3. ConclusionIt can be concluded that it is not reasonable to blame fair value accounting for any of the Wall Street mess since fair value accounting is only bringing out what is fair to investors who deserved to know accurate and reliable information for making decisions. Fair value accounting is an accounting standard made by FASB that was made as a requirement from the corporation which must present truthful and reliable information for investors. As an preference to historical value of accounting, fair value is expected to have present company more reliable information about their assets and liabilities in accordance with market prices.Its implementation may have caused companies to present their financial information and if the information presented were more truthful, the consequence of causing problems to companies should only be secondary to the purpose of providing accusatory and more reliable financial information. Any fall in stock prices from Wall Street may in fact have been caused by companies having to restate their financial statement pursuant to fair value accounting but the intention was to reflect to truer value of assets and liabilities of the corporations whose stocks got affected.Losers should not blame fair value accounting since the latter is just a guide to have more truthful information and they would have a change also of higher stock prices under fair value if warranted by market forces. If there was no basis for such more truthful information, then restatements of financial information using fair value would not have been made in the first place. If buyers and sellers are not being compelled to wind up their transaction, fair value accounting must be held as fair and canno t be blamed for the mess.In fact, fair value accounting should have been introduced years ago for it could have saved some nuisance and a lot of problems (Rees-Mogg, 2007). References Brigham and Houston (2002), Introduction to Financial Management, Thomson-South Western, USA, 2002 Chasan, Emily (2008), Is fair value accounting really fair? vane document URL, http//www. reuters. com/article/reutersEdge/idUSN1546484120080226, Accessed November 21, 2008 Meigs and Meigs (1995), Financial Accounting, McGraw-Hill, Inc, London, UKRees-Mogg (2007), Why FAS 157 strikes dread into bankers, www document URL http//www. timesonline. co. uk/tol/comment/columnists/william_rees_mogg/article2852547. ece, Accessed November 21, 2008. Samuelson and Nordhaus (1992), Economics, McGraw-Hill, Inc, London, UK Sortur (2007) Fair Value Measurement, The Chartered Accountant www document URL, http//icai. org/resource_file/96471564-1574. pdf, Accessed November 21, 2008