because my essay Q is very long that is why I putted it here and you consider the requirements that are given at the end of my essay question.
In September 2007 the FASB issued SFAS (Statement of Financial Accounting Standards) No. 157 on
the measurement of fair value.1 It specifies amongst other things the definition and hierarchy to be
used in fair value measurements (See Hitz 2007). The issues of reliability and relevance and their
trade-off in providing information to users are the triggering factors for such a pronouncement. The
relevance ground has received greater support from many corners (academic and practitioner); though
there are some critics (see Laux and Leuz 2009, Ryan 2008, and Plamrose 2009) of such an
implementation. Laux and Leuz (2009) argue that “the fair value debate is far from over and much
remains to be done” (p 833). They argue that the fair value might not be suitable for investors and
therefore it does not suit the business model of most banks if the investors hold illiquid assets to
maturity. Whittington (2008) argues that “in a realistic market setting, the search for a universal
measurement method may be fruitless and more appropriate approach to the measurement problem
might be how to define a clear measurement objective and to select the measurement method that best
meets that objective in the particular circumstances that exist in relation to each item in the accounts”.
(p 139) Palmrose (2009) argues that the adaptation of fair value to reflect the economic substance
may be useful for making economic decisions, but as heterogeneous users of financial statements may
dismay the determination of fair values in particular using the mark-to-model approach (ie, tier 3
valuations, see Hitz 2007). The adoption of fair value accounting received enormous criticism on the
grounds of relevance as is evident from the economic crisis that we are facing today. Thus, the Fair
Value Accounting (FVA) has become the subject of intense debate in financial accounting and
reporting arena (see Lodh and Gaffikin 2010, Bougen and Young 2011).
Bougen, P. H, and J. J. Young, ‘Fair value accounting: Simulacra and simulation’, Critical
Perspectives on Accounting, (article in press)
Hitz, J. M. (2007), The decision usefulness of fair value accounting: A theoretical perspective’,
European Accounting Review, Vol. 16, Issue 2, pp 323 – 362
Laux, C., and C. Leuz (2009), “The crisis of fair-value accounting: making sense of the recent
debate”, Accounting, Organizations and Society, Vol 34, pp 826-834
Lodh S.C. and M. J. R. Gaffikin, 2010, “Assessing underlying realities of accounting’s duality check
by the accounting equation: a search for an augmented framework”, paper presented at the
APIRA Conference, Sydney, July.
Plamrose, Z, V. (2009), ‘Science, politics, and accounting: A view from the Potomac’, The
Accounting Review, Vol.84, No 2, pp.281-297.
Statement of Financial Accounting Standards 157, FASB, USA
Whittington, G. (2008), ‘Fair value and the IASB/FASB conceptual framework project: an alternative
view’, ABACUS, Vol. 44, No. 2, pp139-168
Based on the above statement, write an essay on the relevance of fair value accounting in the
contemporary world. In your demonstration you should highlight of whether fair value accounting is
applicable for a wide range of organisations in financial reporting. Also, explain whether fair value
accounting has had any influence on the recent subprime crisis in the USA. The expectation is that a
reasonable amount of contemporary research articles (academic and professional) are used in the body
of the essay. Also, you are required to demonstrate the current status of fair value accounting from the
view point of both the International Accounting Standard Board and the International Financial
Accounting Standard Board.
For all other requirements please follow the subject outline.
the instructions for my essay should be like the following steps:-
– the current status of fair value accounting from the view point of both the International Accounting Standard Board and the International Financial Accounting Standard Board.
2.the relevance of fair value accounting in the
3.explain whether fair value accounting has had any influence on the recent subprime crisis in the USA.
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