IAS 16 and the Revaluation Approach: Reporting Property.
The core intention in the adoption of a fair value model as the most appropriate method of measurement for financial and accounting statement is to create a balance sheet and capital value of an organisation that accurately reflects the real market position of that organisation at the date of the statement.
Proponents of fair-value accounting standards, introduced over the last decade, have always argued that recognising financial assets and liabilities at their fair values on an entity’s financial statements would provide more relevant information to investors than historical cost numbers.
Prior research has focused on the impact of fair value accounting on equity markets. The impact of fair value accounting on debt maturity structure and credit risk has not been addressed in the literature. In essay one I investigate how the increased influence of the balance sheet approach on accounting standards is associated with the maturity structure for the most affected companies as.
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According to the International Financial Reporting Standard 13, fair value is the “amount at which an asset could be exchanged between knowledgeable and willing parties in an arm’s length transaction.” (The arm’s length principle recognises that all parties involved in a transaction are actingindependently and there is no special relationship between them.).
FAIR VALUE EMPIRICAL STUDIES: AN OVERVIEW ON ACCONTING RESEARCH LITERATURE Carmen Giorgiana Bonaci1 Adriana Tiron Tudor2 ABSTRACT: Our paper develops a literature review on fair value studies. The purpose of the study is to synthesize the main results of accounting research literature empirically approaching fair value measurement.
Fair value accounting lacks reliability because it relies on estimations more than documents, in general. Even if it is derived from markets, markets are subject to volatility. In case of inflation or recession, that makes it even worse.