ASC Topic 820 also makes it clear that a
fair value measurement does not include transaction costs.
The validity of exposing a business to a market (evaluating at
fair value doesn't mean that we determine the value according to market prices and performances based on variations of
fair value), is not a bad idea, but considering the existence of a liquid market and a process that measures a credible and fair
fair value then users are given real guaranties regarding the real value of the business.
Finally, the ED proposes to distinguish
fair value (a market-based exit price) from acquisition value (a market-based entry price) and use the latter for valuing donated capital assets, donated works of art, historic treasures, and capital assets received in connection with service concession arrangements.
Zack then devotes chapters to
fair value issues for nonprofits and
fair value disclosure issues before ending with sections about the "Detection of
Fair Value Accounting Fraud," including guidance on the subject from the SEC and the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Amendments that dairy how to apply the existing
fair value measurement and disclosure provisions in Topic 820.
The reliability of
fair value measurement is impeded esp.
Similar to recurring
fair value measurements, these judgments should be determined using observable market data when available and any judgments formed by unobservable data should be supported by strong analysis consistently applied, sound rationale and thorough documentation.
For some real estate companies, the
fair value approach will likely add a significant amount to the equity reported on the financial statements to the extent the
fair value exceeds the current carrying value of the Real Estate.
In such instances, even though a nontaxable transaction may yield the highest net proceeds to the seller, the
fair value of the reporting unit is estimated assuming a taxable transaction structure because market participants would not likely structure a deal any other way.
Supporters of
fair value accounting have argued that its application allows users to see the underlying economic reality in a changing environment, while carrying assets at their original costs masks the declining values.
Thus, it is thought that the valuation of balance sheet assets for their
fair value has a certain risk of manipulating results, because
fair value is only an accounting estimate that leads to such behavior as creative accounting.
THOUGH its top trading partners continue to stick with the
fair value or mark to market principle set by the International Financial Reporting Standards (IFRS), China remains unwilling to embrace the principle.
