Fair Value Accounting Select the archived issue you wish to view: Standards Fair Value Accounting Fair value accounting contains a superior basis for financial reporting than the outdated historical cost model. FROM: SEP-OCT 2005 ISSUE | BY HAN DONKER In recent years‚ international standard setters and regulators such as the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) have begun
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Moving towards Fair Value Accounting In the past‚ historical cost measures were mainly used for reporting as they are reliable. However‚ historical cost is only relevant upon acquiring the asset and becomes irrelevant as time passes. On the other hand‚ fair value-based reporting‚ which accounts for changes in fair values‚ can produce balance sheet figures that provide a better reflection of the company’s value. This is also why accounting bodies are moving towards fair value accounting (FVA). One
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Recently‚ fair value accounting suffers heated debate because the financial crisis. The purpose of this article is to evaluate and understand fair value both in literature analysis and practice. This paper emphasizes the advantages and disadvantages of the fair value measurement. Proponents believe that fair value can provide timely information that reflects current financial market conditions‚ and information supplied is reliable. On the other hand‚ critics argue that fair value accounting results
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What is Fair Value Accounting? An alternative approach to measurement that seeks to capture changes in asset and liability values over time. The International Accounting Standards Board (IASB) defines fair value as "... an amount at which an asset could be exchanged between knowledgeable and willing parties in an arms length transaction". Under the fair value measurement approach‚ assets and liabilities are re-measured periodically to reflect changes in their value‚ with the resulting change impacting
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Fair value accounting Type of accounting that companies measure & report certain assets and liabilities at prices the company would receive if they sold them and liabilities are reported at the value the company would receive if they were relieved of them. The purpose of this method is for creating realistic financial statements. Advantages of Fair Value Accounting Reduced Net Income when values of assets decrease‚ the company’s calculated net income decreases. lower net income results in
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Financial Accounting Easy: 1. Which of the following is usually considered cash? a. Certificate of deposit b. Checking account c. Money market saving certificate d. Postulated Check 2. In preparing the August 31‚ 2011 bank reconciliation‚ Apex Company provided the ff. information Balance per bank statement 1‚805‚000 Deposit in transit 325‚000 Return of customer’s check for 60‚000 Insufficient fund Outstanding checks 275‚000 Bank service change
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Allfoods Corp. (Allfoods) acquired 80 percent of the outstanding common stock of Baked Beans Corp. in a business combination. After value consideration transferred value of tangible and intangible assets acquired‚ libilities assumed‚ I recommend doing this consolidation general entry for the business combination: Dr. | Land | $ 21‚000‚000 | | | | Dr. | PPE | $ 7‚000‚000 | | | | Dr. | IPR&D | $ 15‚000‚000 | | | | Dr. | Trademark | $ 3‚000‚000 | | | | Dr. | Goodwill
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Financial Accounting Theory Fall 2011 Professor Kevin C. K. Lam Room 1016 Chung Yu Tung (CYT) Building The Chinese University of Hong Kong Phone: 2609-7894 E-mail: kevinlam@cuhk.edu.hk Webct: http://webct.cuhk.edu.hk Course Scope and Objectives Financial Accounting Theory is concerned with the models‚ hypotheses‚ and concepts that together form the foundation for financial accounting practice. This course introduces modern financial accounting theories and integrates accounting practices
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Under fair value accounting‚ earnings of a firm constitutes three broad components namely asset income‚ realized gains and unrealized gains. What impact does this have on a firm’s earnings quality given that the main shift from current accounting standards is the inclusion of unrealized gains into earnings computation? Often‚ it holds true that what matters is not how much a firm makes‚ but how it makes its money . Investors value earnings that are sustainable‚ inherent to a firm’s business and
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university | Is It Fair to Blame Fair Value Accounting for the Financial Crisis? | By Robert C. Pozen | | Luma Raha | 10/12/2011 | The article from the Harvard Business Review‚ "Is it Fair to Blame Fair Value Accounting for the Financial Crisis?" ‚ author Robert Pozen stipulates that the fair value accounting principles did not cause the financial crisis of 2008‚ but certainly aggravated it by common misconceptions about accounting standards. The article defines mark-to-market valuations as
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