Finance
- Submitted by: fanatic786
- Views: 348
- Category: Politics: Economics
- Date Submitted: 10/09/2013 03:25 AM
- Pages: 15
- Report this Essay
fair value accounting in india
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 either net income or other comprehensive income for the period. The result is a balance sheet that better reflects the current value of assets and liabilities. The cost is greater volatility in periodic reported performance caused by changes in fair value.
FAS 157 define 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.” This definition of fair value reflects an ideal “exit value” notion in which firms exit the positions they currently hold through orderly transactions with market participants at the measurement date, not through fire sales.
Currently the definition of fair value stands as “Amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.
If quoted in an active market then objective would be the price at which transaction would occur at the balance sheet date in most advantageous market and methods applied would be published price quotations when available, use market quoted rate in valuation techniques or bid price for asset held
– If not quoted in an active market then objective would be transaction price in arm’s length transaction motivated by normal business considerations and method applied would be valuation techniques (recent market transactions, similar instruments, DCF analysis etc.), use commonly used and reliable valuation...
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 either net income or other comprehensive income for the period. The result is a balance sheet that better reflects the current value of assets and liabilities. The cost is greater volatility in periodic reported performance caused by changes in fair value.
FAS 157 define 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.” This definition of fair value reflects an ideal “exit value” notion in which firms exit the positions they currently hold through orderly transactions with market participants at the measurement date, not through fire sales.
Currently the definition of fair value stands as “Amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.
If quoted in an active market then objective would be the price at which transaction would occur at the balance sheet date in most advantageous market and methods applied would be published price quotations when available, use market quoted rate in valuation techniques or bid price for asset held
– If not quoted in an active market then objective would be transaction price in arm’s length transaction motivated by normal business considerations and method applied would be valuation techniques (recent market transactions, similar instruments, DCF analysis etc.), use commonly used and reliable valuation...