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FASB No. 157, Fair value accounting

After reading an article about the controversy of companies using fair value accounting, the new auditor, Kelle, comes to you with questions. You decide to provide the new hires with some information on fair value accounting.

Send them a memo defining and discussing fair value accounting. This memo needs to include the following:

Explain what the FASB Statement No. 157 is and why it came about.
Explain whether you think Statement No. 157 properly addressed the fair value issue and why or why not.
Describe at least 2 different valuation methods.
Explain which valuation method you believe is the best (fair value is an option), and support your answer with rationale and cited evidence.

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Accounting Issues Impacting the Business Environment

After reading an article about the controversy of companies using fair value accounting, the new auditor, Kelle, comes to you with questions. You decide to provide the new hires with some information on fair value accounting.

Send them a memo defining and discussing fair value accounting. This memo needs to include the following:

Explain what the FASB Statement No. 157 is and why it came about.

FASB Statement No. 157 is an accounting standards developed by the Financial Standards Board which became effective for firm with fiscal years after 15 November 2007. The FASB Statement No. 157 defines fair value as 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.

FASB Statement No. 157 clarifies what is fair value, it sets up a hierarchy used to classify the source of information used in fair value measurements, Made mandatory that changes in credit risk should be included in the valuation, changed the rule hat a measurement date-specific transaction price is same as measurement date-specific fair value. FASB Statement No. 157 has increased the disclosure obligations for assets and liabilities measured at fair value. The FASB Statement No. 157 applies only when accounting rules makes it mandatory or allows fair value measurement for an asset or liability (1).

Explain ...

Solution Summary

FASB No. 157, Fair value accounting is discussed very comprehensively in this explanation..

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