Fair Value

The Case Study analysis will be based on the company Meridian Energy Limited(MEL). Meridian is leading manufacturer of renewable electricity and its customers are from all over Australia and New Zealand. The company is largest electricity generator and is the major contributor to the government’s target of renewable energy generation (Meridian, 2016). The objective of the case study is to critically analyse the application conceptual framework of accounting and also the accounting standards that relate to them. The case studies focus will be on the Statement of changes in Equity. Also the focus will be on the extent of application judgement and estimates that have been made by MEL and the issues which may arise because of these estimates.

1. (Exhibit 1: Total Product) Between points A and B the marginal product of labor is:

The changing nature of business from cost-bases assets and liabilities to more market-oriented assets and liabilities drove the move towards increasing use of fair value accounting. Under the momentum, a measure like net income

In our presentation, we want to discuss how fair value accounting affects society in businesses. One example of how this effected society as a whole was the 2008 financial crisis. In this financial crisis, many companies were impacted but in particular AID insurance company faced a 11 billion dollar write down of debt before FASB introduced their new guidelines of SFAS 157. If this happened after these guidelines were passed, this company would have had a loss more like 900 million dollars. As a result, a company with trillion dollars of assets reported unrealized losses of tens of billions. Another area that was impacted was the American Banking

The fair value of an asset is defined as ‘the price that would be received to sell an asset paid to transfer a liability in an orderly transaction between market participants at the measurement date” (Kieso, Weygandt, & Warfield, 2012). It is a market based measure (Averkamp, 2014). Over the past few years, Generally Accepted Accounting Principles has called for the use of fair value measurement in a company’s financial statements. This is what is referred to as the fair value principle (Kieso, Weygandt, & Warfield, 2012). The fair value of an asset or liability is based on an estimate of what the asset should be worth at the time of sale. This gives rise to some conflict among accounting professionals. It is believed that fair value may not be as accurate

ohnson, J., & Higgins, A. (2014). Evaluating the fair market value to pay for performance. Healthcare Financial Management, 68(4), 80-54.

Secondly, fair value model offers more accurate balance sheet and income statement. The fair value model lists investment properties on the balance sheet at their fair value. Any changes in fair value are recorded directly to the income statement as other gains or losses. Therefore, under fair value model, investors can obtain more relevant and accurate information.

“When determining fair value, we consider the principal or most advantageous market in which we would transact, and we consider assumptions, such as an obligor’s credit risk, that market participants would use when pricing the asset or liability. For further information, see “Fair Value” in “Note 2: Accounting Policies” in Part II, Item 8 of this Form 10-K.”

Historically ,it is seen that there are numerous number of disputes in the field of financial reporting among different professionals, regulators and theoretitions .most of these disputes are related to the valuation of financial reporting components.the current curve in the progress of valuation is the push for and against the fair value approach.the purpose of this research is to examine the arguments on the use of fair value accounting and to identify the issues related to implementation of fair value accounting standards. Further, the results of literature related to role of fair value accounting within financial crisis are also investigated.

gives an excellent account leading up to the current recession and also the effect on fair value

The fair value measurements does provide the users who have the financial statements with correct picture of the value of the company’s assets. The IFRS and GAAP, demand firms to include information that is essential to fair value

The Accounting profession has its fiduciary duty to deliver the information and make correct decisions. To support the high quality of information accounting standards constantly faces difficulty to keep the framework up to date. In the recent global financial crisis fair value has come under the light of examination. Some critics have blamed the global financial crisis on market to market accounting (fair value accounting). I must say fair value increase firms transparency. Subsequently, through this rule, the obligation of the accounting mention above is further completed: financial specialists are getting essential data on which they make their

In today’s businesses, there has been an increase in the demand for financial reporting and also, the need to have reliable measurements of fair value and its disclosures. The need for reliable information has caused continuous change to accounting policies which has posed a challenge not only to management of companies, but also to auditors. The frequent changes in accounting principles pose a challenge for managers in measuring accounting estimates accurately and are an exceedingly difficult task. Fair value accounting is a financial reporting approach in which companies are required to measure and report on an ongoing basis certain assets and liabilities at estimates of the prices they would receive if they were to sell the assets or would pay if they were to settle their liabilities. Under fair value accounting, companies report losses when the fair values of their assets decrease or liabilities increase. Those losses reduce companies’ reported equity and may also reduce companies’ reported net income.

Still, it is hard to ignore the fact that the recent financial crisis has exposed some shortcomings of fair value accounting. Reporting fair value in illiquid markets creates earnings volatility and

According to Mary E. Barth (2007), an analysis regarding the latest activities of the International Accounting Standard Board (IASB) have revealed that the use of fair value as a measurement base in financial accounting is probable to increase. With the increased probability of using fair value as a measurement base and the adoption of international accounting standards by Australia, it