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FASB fair value using time value of money tools

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Please help with the following problem regarding the time value of money.

Define the concepts of present value and elaborate on your interpretation of their value as assessment tools for an accountant or operator (include an example). Provide at least 300 words.

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Solution Summary

The tutorial is 368 words.The discussion explains that FASB is trying to value assets that are not traded or market tested and those are just hard to value.

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Problem: Define the concepts of present value and elaborate on your interpretation of their value as assessment tools for an accountant or operator (include an example).

Solution:
The most important concepts in the FASB's quest to have future obligation or future cash flows appropriately measured on the balance sheet is the concept of present value. FASB clearly expects the promise or obligation to pay of $1,000 today to be valued higher than a promise or obligation to pay of $1,000 ten years from now. In order to express a fair valuation of the future promise or obligation, the ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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