ACC 308 8 1 Discussion PDF

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8-1 Discussion: Fair Value and Impacts in the Professional Field Revisit the article Fair Value Under Fire and consider other resources used throughout the course. Discuss the potential impacts of fair value within the professional field. What should be considered in regard to fair value accounting and whether it is the best decision for the company? What information would be most valuable to management, lenders, and investors as it relates to fair value or other concepts covered in the course? In your responses to your peers, discuss the impacts of fair value as they relate to organizations that regulate accounting practices. What should businesses do to ensure alignment with them in their accounting practices? To complete this assignment, review the Discussion Rubric document.

The possible motives for individuals from financial services to support fair value accounting are complex and numerous. First, investment banks and asset managers are accustomed to using fair value in their day-to-day business to prepare in-house balance sheets for riskmanagement purposes. This familiarity with the method may have shaped their preferences in public financial reporting standards. Second, GAAP profits defined on a fair value basis rather than a historical cost basis accelerate the recognition of gains, particularly in periods of rising asset prices. To the extent that managerial bonuses are based on GAAP profit numbers, financial services executives reap richer rewards in a fair value regime. Third, the use of fair value to determine impairment of goodwill from M&A activity (in lieu of the historical cost approach of amortizing goodwill) imposes, on average, less drag on earnings, thus potentially boosting M&A activity—a major revenue source for investment banks.

We should consider in fair value accounting：

Current market conditions. The derivation of fair value should be based on market

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conditions on the measurement date, rather than a transaction that occurred at some earlier date. 

Intent. The intention of the holder of an asset or liability to continue to hold it is irrelevant to the measurement of fair value. Such intent might otherwise alter the measured fair value. For example, if the intent is to immediately sell an asset, this could be inferred to trigger a rushed sale, which may result in a lower sale price.

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Orderly transaction. Fair value is to be derived based on an orderly transaction, which infers a transaction where there is no undue pressure to sell, as may be the case in a corporate liquidation.

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Third party. Fair value is to be derived based on a presumed sale to an entity that is not a corporate insider or related in any way to the seller. Otherwise, a related-party transaction might skew the price paid. Reference Ramanna, Karthik. (2013). Why "Fair Value" Is the Rule. Hervard Business Review. Retrieved from https://hbr.org/2013/03/why-fair-value-is-the-rule . Bragg, Steven. (2018). Fair Value Accounting. AccountingTools. Retrieved from https://www.accountingtools.com/articles/fair-value-accounting.html ....