International Accounting Standards Codification System

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In 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (SFAS 157), and in 2007 issued Statement No. 159. The objective of SFAS 157 is to increase the consistency, comparability and transparency of fair value measurements used in financial reporting by establishing “a single authoritative definition of fair value, a framework for measuring fair value, and fair value financial statement disclosure requirements”(http://www.iasplus.com/en/binary/usa/0808fairvalueupdate.pdf). In 2011, the FASB and the IASB substantially converged the guidance for measuring and disclosing fair value under US GAAP and IFRS through the issuance of two standards: Topic 820 and IFRS 13. These standards are the current authoritative guidance on fair…show more content…
As discussed above, the publishing of either the standards under the GAAP (SFAS 157 and SFAS 159) or the new standards from the convergence project (Topic 820 and IFRS 13) have the same intention to strengthen the consistency, comparability and transparency of fair value accounting. No matter fair value accounting is under GAAP or under IFRS, they have in common to reduce complexity of accounting, enhance understanding and reduce motivation to structure transactions so as to achieve certain accounting treatments for assets and obligations. The fair value standards emphasize that fair value is a market-based measurement and hierarchy of inputs is used in determining fair value estimates. The hierarchy gives the highest priority to observable market inputs and the lowest priority to unobservable market inputs. Especially Level 1 inputs transparently reflect fair value. At this point, fair value makes a company 's balance sheet more transparent and improves the investors’ insight. Investors may prefer the fair value methodology because it 's easier for them to determine what a company is really worth when its assets are valued at prevailing market prices. Moreover, basing on the available and comparable price data, companies can
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