The Impact Of Fair Value On Financial Reporting Essay

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The most controversial topic of today’s time in the world of accounting is fair value. However, one common point of confusion is the scale of businesses affected by fair value, and when fair value came onto the scene. According to Robert Herz and Linda MacDonald “...the use of fair value in financial reporting is not new. In fact, it has been in place for decades, principally for financial assets. But even then, fair value is not required for all assets.” (2008) The idea of using fair value measurements goes back at least to the 1930’s when Kenneth MacNeal wrote Truth in Accounting. It wasn’t until 1993, however, until the FASB released SFAS 115. SFAS 115 addresses the accounting and reporting for investments in equity securities that have readily determinable fair values and for all investments in debt securities. (FASB 1993) In 2006 the FASB released SFAS 157, which established a framework for measuring fair value. SFAS 157 also requires significantly more disclosures about fair value estimates than ever before. (FASB 2006) Finally the FASB issues SFAS 159, which permits entities to choose to measure many financial instruments and certain other items at fair value. (FASB 2007) These statements set the stage for the discussion of the advantages and disadvantages of fair value. Also discussed, will be the problems with implementation of a full fair value measurement system. That discussion will be followed by a brief summary.
II. Methodology
The foundation of this paper
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