Fair Value And Financial Statements

Fair Value and Financial Statements The ability of fair evaluate measurement to satisfy the principle qualitative characteristics of the framework is more a matter of judgment than fact. Fair sets relevance to users of financial statements is undermined by the lack of dependableness and the softness to satisfy other qualitative characteristics of the framework. The driving force for the writ of execution of fair regard as measurement is that it departs a more relevant picture of an entity. For assets with an prompt market the fair value represents the exchange in inflows of the asset and in that locationfore a more germane(predicate) force rank than historical cost. Fair value measurement aligns the value of an entity to the occurrent economic climate and thereby makes the information more relevant for end users and their interactions with an entity and satisfies the qualitative characteristics of relevance. The alignment of the entity to the ec onomy reveals the true value of the entity. But this alignment through fair value as stated by Ebling (2001, p24) could be dominated by large, a lot meaningless swings in the value of assets and liabilities that could obscure the underlying trends.

notwithstanding fair value presents users with information that is more relevant than historical cost measurement especi bothy for an entity with majority of assets with an brisk market. reliability of fair value is the main concern with assets with no active markets. With assets with an active market it can be argued that the markets atomic number 18 non eternally rational or perfect and the markets will not be able to sup ply a true picture for all assets but as sta! ted by Ebling (2001, p24) the JWG believes there is null false about market prices and relies on the pileus markets to swear out as intended and supply fair value for assets. The markets are not restricted to one entity and not subordinate on a small group of decision makers. Markets provide neutrality by ignoring ownership and purchase details and...If you urgency to select a full essay, order it on our website: OrderEssay.net

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