Fair Value of Accounting Research Paper Example | Topics and Well Written Essays - 1250 words

fair(a) Value of Accounting - Research Paper utilisationFair entertain accounting has cemented its place really well in the world of accounting on the grounds that it gives more relevant information to users. This method is a realistic approach that gives the actual deserving of an entity. accord to Patricia McConnell1, fair value accounting method requires the preparers of financial statements to adjust them according to the fair values. This need helps the investors to spend a penny a better psychoanalysis of financial statements. The primary objective of financial statement analysis is the comparative measure of risk and return. General purpose financial statements do not provide the necessary data for this comparative analysis without pregnant adjustments. A clearer picture of financial statements provides the investors with a chance to make good decisions.fair value accounting method gives fair value estimates and discloses a range of realizable outcomes which may hel p a sophisticated investor but at the same may plague the open investor with ambiguity and information overload.Fair values biggest drawback, and the major reason of its opposition, is the lack of reliability. It is because unless an asset is fungible in an arms length transaction, its value would always be an estimate. According to a conduct by Avinash, Arvi & Alan Reinstein3, critics have argued that fair value accounting method aggravated the recent crisis by requiring significant write-down of assets and hence resulting in sharp decreases in regulatory capital of banks and other financial institutions. Fair values tend to fluctuate vastly in a short period at times. According to Michael Power4, there are many arguments against the fair value accounting method but they dont automatically become arguments in favor of historical cost accounting method. The definition of fair value shows that it is the amount which might be obtained in a market. Various commentators have argued a bout